Lawrence A. Cunningham Famous Quotes
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Gross profit margin demonstrates competitive advantage: it is the purest expression of customer valuation of a product, clearly implying the premium buyers assign to a seller for having fashioned raw materials into a finished item and branding it.
sustained high gross profit margins relative to industry peers tends to indicate durable competitive advantage. Zeroing
best businesses to own are those in which end markets are growing rather than shrinking. Absent
we are confident that the fundamental principle of long-term ownership of quality companies is a sensible one, new
Asset-light industries are attractive since they require less capital to be deployed in order to generate sales growth. The finest examples are franchise operations, such as Domino's Pizza, where growth is funded by franchisees rather than by the company. Other
Valuation premiums of quality companies often reflect some degree of expected operational outperformance, but actual performance tends to exceed expectations over time. Stock prices thus tend to undervalue quality companies.
To achieve sustained high returns on capital requires possessing features that protect returns from competition; namely, competitive advantages. Identifying what these competitive advantages are and understanding their sustainability is an essential part of the quality investment process.
The value any business creates, listed or not, is determined by the rate at which it deploys incremental capital. And
high capital intensity companies can also be attractive, especially where the capital requirement confers stability and deters entrants.
