I previously wrote about the 7 types of moats of quality companies. Another way to look at moats is from a capital allocation perspective. A few years ago, Connor Leonard from IMC made a wonderful presentation on 3 types of capital allocation moats: Legacy moat Reinvestment moat Capital-light compounder Legacy moat is companies that earn […]
The mistake we often make when valuing a stock is overestimating the business growth potential, how much free cash flow it can generate, and so on. We extrapolate a spurt of excellent performance caused by temporary changes such as a brief supply and demand tailwind into the distant future. Or sometimes, we just fail to […]
4 February 2020 UK SFO (Serious Fraud Office) had implicated AirAsia directors/staffs on 31 Jan 2019 for involvement in bribery allegations with Airbus. Below are the key points. You can also refer to the links below for further readings. SFO enters into €991m DPA (Deferred Prosecution Agreement) with Airbus. Improper payment consists of $50m to […]
In my previous post, I wrote that to achieve outperformance or above-average returns, your investment process has to be ‘unconventional’ compared to the majority. And that can only be achieved through originality, independent or contrarian thinking, and making connections from disparate information. Bill Miller, the former Legg Mason portfolio manager, emphasizes the importance of making […]
Scale economies is one of the seven moats of quality companies. Scale economies mean the fixed cost per unit falls as volume increases. Fixed cost is indivisible. And indivisibilities are more likely when an activity is capital intensive. The 3 main sources where scale arises are distribution, manufacturing and niche market. A dense distribution network […]
Price to Earnings ratio is the most widely used tool to gauge the attractiveness of a stock. But it is important to know the limitation of PE ratio so we don’t fall for the “everything looks like a nail to a man with a hammer” illusion. Here are a few things to understand. Confuse between […]