What differentiates a good business that earns a long-term above-average return from a mediocre business that, at best, only earns a return close to its cost of capital? A good business can control its supply while a mediocre business can’t. Take Ferrari. Ferrari has a 24% operating margin with above-average return on capital, higher than […]
Peter Thiel is a co-founder of PayPal and Palantir Technologies, which specialized in big data analytics. While it is more apt to call him a tech entrepreneur than an investor, he knows something about moats and good thinking. Peter Thiel explains the differences between perfect competition and monopoly: “Every firm in a competitive market is […]
Since 1930, dividend has been responsible for 42% (on S&P 500) of the stock market return so there’s little surprise that it is one of the main criteria we look for when picking stocks. However, in investing, everything involves an opportunity cost. So the question to ask is – Is focusing on dividend as a […]
This is a simple table that shows the ‘appropriate’ multiples i.e P/E or EV/EBIT given a level of constant growth rate & return on invested capital (ROIC) using a 10% cost of capital or discount rate. PDF: http://bit.ly/2fq3zvW Horizontal is the ROIC rate whereas growth rate is on vertical. Please do not use this for […]