Charles “Chuck” Akre manages ~$11.8B from a small town in rural Virginia, far removed from the frenzy of Wall Street. His team dedicates their time to hunting for what they call “compounding machines,” and their track record speaks for itself (1.2% outperformance over 16 years). To find these...
If we had to create 10 rules for successful long-term investing, they wouldn't differ much from what Peter Seilern presents in his 2024 book "Only the Best Will Do." Seilern discovered that from ~50,000 publicly quoted companies in OECD countries, fewer than 60 meet the 10 golden rules...
Novice investors may attribute pricing power, what Warren Buffett calls "the single most important decision in evaluating a business," to a business that can raise the cost of its products/services every year, ideally keeping up with inflation. But more seasoned investors recognize that businesses with real pricing power...
When you research a stock, the challenge isn't finding information. It's filtering through endless data, news, and opinions to identify what actually matters. But what truly matters? Ensemble Capital uses three overlapping criteria to answer this question: President and CIO Sean Stannard-Stockton presented the framework during the firm's...
Return on invested capital (ROIC) measures company profits expressed as a percentage of invested assets or capital. There are different variants, but at its core, ROIC captures how much money a company earns on the capital it has invested in its business. Companies consistently generating high returns on...
When trying to estimate a company’s future potential and valuation, many investors take the quick/lazy approach and rely on analyst estimates for guidance. But as I’ve written about before, this is a flawed approach. David Dreman’s "Contrarian Investment Strategies: The Psychological Edge" (2012) provides extensive evidence that builds...
Since the 1960s, businesses have relied on SWOT analysis (strengths, weaknesses, opportunities, threats) to guide their strategic thinking. This approach suggests companies gain competitive advantages by exploiting their internal strengths and external opportunities while avoiding weaknesses and threats. Jay Barney's 1991 paper "Firm Resources and Sustained Competitive Advantage"...
Warren Buffett, who has a long history of investing in and expressing faith in the banking industry, has recently soured on bank stocks. Berkshire outright sold Wells Fargo (WFC), JPMorgan Chase (JPM), and Goldman Sachs Group (GS) in 2020 and 2021, while reducing a longstanding holding in U.S....
Many management teams see mergers and acquisitions (M&A) as a guaranteed path to business expansion and increased profits. Yet poorly executed M&A has proven to be one of the fastest ways companies can destroy shareholder value. To understand how to evaluate M&A decisions, we can turn to Michael...