A good business is one that holds a sustainable competitive advantage. This will allow the company to generate constant high returns, which management can then reinvest into the business.
Management is Essential
How management is redeploying its capital will determine how successful the business is for the long-term. We prefer management teams that take advantage of their runway for growth and constantly reinvests, rather than “rewarding” shareholders with buybacks and dividends.
Room to Grow
If a company can’t grow its market share, geographic reach or operates in a dying industry, it will be difficult for the business to naturally expand.
Valuation Still Matters
Although we would always rather buy a great company at a decent price than a decent company at a great price, it is imperative to not overpay for an investment. Discipline is as important to making money as is an investor’s investment approach.
Diamonds in the Rough
An investor must understand that they may only come up with a dozen excellent investment ideas that play out in their lifetime.