Tag: Quality and moats
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What I won’t own
The Quality Series · part 9 of 13 The only risk that really matters to me is that the business erodes its “quality” and stops compounding. Every facet I look for in a world-class business, everything in the first eight parts of this series, is a defence against that one risk. While I am by…
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A moat is the power to raise prices
The Quality Series · part 7 of 13 Everyone talks about moats. In practice I use a simple test: can the business increase prices without losing the customer — and hold or grow its market share while it does? That is what a moat means to me. Brand, network, switching costs, patents — they matter…
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Why return on capital decides it
The Quality Series · part 6 of 13 Munger made a point I have never been able to improve on. If a business earns 6% on its capital over forty years and you hold it for forty years, you will not do much better than 6%, even if you bought it cheaply. If it earns…
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The secret sauce
The Quality Series · part 5 of 13 If I had to name the single most important factor behind long-term outperformance, it would be what Buffett called economic goodwill — to me, the primary measure of a business’s capital efficiency. I first wrote about it in 2016, and it has been the cornerstone of how…
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From great business to great investment
The Quality Series · part 3 of 13 Why does linearity matter? Because it is the first link in a chain. A great business and a great investment are not the same thing, and the journey from one to the other has five links. I think about them in this order. Linearity. A world-class business…
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Same five years, very different businesses
The Quality Series · part 2 of 13 Here is a comparison I keep coming back to. Two companies each take their free cash flow per share from one to two over five years. Same starting point, same end point, same growth on paper. The first gets there steadily, a little more each year. The…
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The whole idea, in one line
The Quality Series · part 1 of 13 People sometimes ask me, usually over dinner, what I actually do. The honest answer fits in one line: own shares in a small number of the finest businesses in the world, refuse to overpay for them, and have the patience to let compounding do the work. Each…