Supply – How to find quality businesses

Compounder, Moat, Scale Economies, Value Creation

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 […]

10 Lessons on Moats

Capital Allocation, Compounder, Moat, Strategy

Moat is independent of market size The common misunderstanding for moat like scale economies is that it only exist in large markets. While a company has to reach a certain size to achieve scale advantage, it is in relative to the size of its competitors, not the size of the market. A company that is […]

Is Dividend the Right Strategy for You?

Compounder, Dividend, Value Creation

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 […]