Not all brands are created equal. This article lays out a framework for analyzing consumer preference driven moats.
In this article, we discuss an analytical process for evaluating economies of scale cases that lead to sustainable competitive advantages. Through the example of Shoprite Holdings, we present an analytical process for effectively evaluating economies of scale; a process driven by size of the industry in relation to the efficient scale, steepness of cost differentials, ancillary competitive advantages, and market structure.
Lately, quality as an investment factor has received significant attention. In our earlier articles on this topic, we have discussed a key element in the process of identification of quality businesses is the presence of competitive advantages. However, not all competitive advantages are created equal. The strength of the competitive advantage and the risks that the business needs to protect itself against are largely dictated by the type of competitive advantage that the business possesses. This article provides a summary overview of the various types of competitive advantages that we have identified over the years.
The authors discuss entry and exit barriers and their interaction as basic building blocks of a decision making process for evaluating competitive advantage of a business. While the concept of entry barriers is much discussed in the context of high quality businesses, the authors posit that exit barriers are also very important and in many cases, may cancel the positive effects of entry barriers. Through the examples of auto makers and airlines, the author show that when strong exit barriers coincide with a high fixed cost structure, the returns on capital frequently end up in poor territory.
Quantitative investing and trading systems have increasingly become popular with investors. However, while such systems work for some time, most of them carry a significant risk of blow-up. In this article, we discuss why do most quantitative investing and trading systems eventually blow-up and provide our view on how to minimize such risks.