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Investment Insights

Sustainable Competitive Advantages

PERSPECTIVES: Consumer Preference – An Analytical Framework

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Sustainable Competitive Advantages: Consumer Preference
By Baijnath Ramraika, CFA and Prashant Trivedi, CFA with assistance from Ms. Siddhi Gujar
August 2, 2016

This article first appeared on Advisor Perspectives.

In this article:

Understanding how to analyze a moat is critical to evaluating the value of any business, and subsequently an important factor in knowing whether you should invest in a particular business. In this article, we explain why we believe terms like “brand moats” or “intangible assets-based moats” are misleading and will set up investors for behavioral errors.

It’s not enough to call a moat by its right name. We delve further to see whether this moat is a sustainable competitive advantage. Discover the two elements that need to be present and form the primary components of an analytical framework to identifying a consumer preference moat, along with ancillary factors such as pricing power and product differentiation. You’ll understand our rule of limit to the pricing power of the incumbent through examples of companies like Parle-G.  You’ll learn why investing in emerging markets and specifically consumer companies needs to be treated with caution.

To help you understand our framework better, we take you through a step-by-step analysis of Colgate

“Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it’s the lack of change that appeals to me.” – Warren Buffett (emphasis ours)

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Mutual Fund Investing: Simple but Not Easy?

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Dalbar, a Boston based analytics group has been studying the US markets for over 20 years and they have been publishing reports which compare the performance of an average Mutual Fund investor as compared to the Market Indices. Important point to note here is that the performance calculated was for the investor in the Mutual Fund and not the Mutual Fund itself which is more readily available.

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Economies of Scale: An Analytical Framework for Assessment of A Firm’s Competitive Advantage

By | Global Equity, Investment Insights | No Comments

This article originally appeared on Advisor Perspectives.

“The moat in a business like our auto insurance business at GEICO is low cost. I mean people have to buy auto insurance, so everybody’s going to have one auto insurance policy per car basically, or per driver. And…I can’t sell them twenty…but they have to buy one. Read More

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The 6 Sources of a Firms Competitive Advantage

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This article originally appeared on Advisor Perspectives.

As we have discussed previously, sustainable competitive advantages (SCAs) are a key characteristic of high-quality businesses. While SCAs are good indicators of business quality, not all competitive advantages are created equal.  The strength of the competitive advantage and the risks that the business needs to protect itself against are largely dictated by the type of competitive advantage that the business possesses. Read More

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Strike Gold

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The recent decline in the price of gold has led many market participants to question the investment value of the yellow metal. Much has been spoken and written about the relatively poor return to be earned from gold. We think investing is NOT an exercise in bragging rights about which asset class has higher returns in the past and are therefore assumed to hold in the future. Read More

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Why Most Quantitative Investing and Trading Systems Fail

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This article originally appeared on Advisor Perspectives.

“Invert, Always Invert.” – Carl Gustav Jacob Jacobi, German Mathematician

“Hundreds of studies have shown that wherever we have sufficient information to build a model, it will perform better than most people.” – Daniel Kahneman (as you read this statement, don’t forget to consider the implication of the word “sufficient”)

“Roger Federer plays tennis using Wilson racquets. I use Wilson racquets. Does that make me Roger Federer?” – Paraphrasing a friend of ours. Read More

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We Are Happy To Score Centuries With Just Ones And Twos And Not Necessarily With Sixers

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Prashant K Trivedi, Chairman of Multi-Act Trade & Investments Ltd., talks about his investment philosophy, especially for family office investors with long term patient capital, and how he constructs his portfolio. His investment philosophy of giving appropriate weightage to quality, valuation and price momentum has helped him offer capital preservation and good returns to the investors. Read More

Portfolio Management Services (SEBI Registration No. INP000002965) are offered through Multi-Act Equity Consultancy Private Limited (CIN: U67120PN1993PTC074692), which is a wholly-owned subsidiary of Multi-Act Trade and Investments Private Limited; Investment Advisory Services (SEBI Registration No. INA000008589) are offered through Multi-Act Trade and Investments Private Limited (CIN: U65920MH1997PTC109513).