Thursday, February 2, 2012

Demystifying Advantages

On this blog, you will mostly find discussion of low multiple stocks, as far as investment discussions go. That is, a company undergoing some temporary difficulty that trades at a low P/E or low P/S or low P/B will be discussed, with the hope or expectation that it will eventually return an average return on capital, thus rewarding shareholders.

While Warren Buffett has made money in this type of investing, he no longer practices it. Instead, he focuses on finding companies with competitive advantages. These companies generate superior returns on capital. But as a result, they don't trade as cheaply, prompting this quote from Buffett:

"It's far better to buy a wonderful business at a fair price than it is to buy a fair business at a wonderful price."

But how does one tell the difference between a wonderful and a fair business, assuming similar financials? If you can't tell the difference, you wouldn't be buying with a margin of safety.

csinvesting is a relatively new blog that focuses on just this type of investing. Request access to the site's Vault, where a number of resources (including books, case studies, lectures etc.) are available to help you in identifying and understanding competitive advantages.


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