Return on Capital<\/a><\/li><\/ul>\n\n\n\nAll of the above metrics help you find companies that do a great job utilizing the capital it earns to boose their returns; the stronger their overall ratios, the better the company performs over the long run.<\/p>\n\n\n\n
You can use any of these metrics as a means for screening companies that have durable competitive advantages. But they are not a means unto themselves. You will have to use some “soft” skills to determine sources of competitive advantage for any company you are considering.<\/p>\n\n\n\n
Final Thoughts<\/h1>\n\n\n\n
Long-term buy-and-hold investors like us should always look for great businesses at fair prices, but keep in mind that competition usually works against shareholders by eroding “wonderfulness” over the long term. A high-quality stock should possess a wide moat, demonstrating one or preferably a combination of the abovementioned characteristics.<\/p>\n\n\n\n
We listed many great examples of companies with competitive advantages. We used many of the quantitative methods we discussed, such as high grossing, high net margins with consistently low Cap-ex levels, indicating a minimal investment required to stay competitive.<\/p>\n\n\n\n
Understanding the sources of competitive advantage is crucial to identifying wide-moat companies. Once you understand the advantages and the sources, you can identify them in any company you own and the ones you want. The understanding also helps you track your company’s performance over the long term and help you identify when the advantages might start to wane.<\/p>\n\n\n\n
That will wrap up our discussion today about sources of competitive advantage. As always, I want to thank you for taking the time to read this post, and I hope you find something of value to use on your investing journey.<\/p>\n\n\n\n
If I can be of any further assistance, please don’t hesitate to reach out.<\/p>\n\n\n\n
Until next time.<\/p>\n\n\n\n
Take care and be safe out there,<\/p>\n\n\n\n
Dave<\/p>\n","protected":false},"excerpt":{"rendered":"
“If you build a better mousetrap, the world will beat a path to your door.” Ralph Waldo Emerson As investors, searching for companies with a competitive advantage continues as a never-ending goal. We all desire to find a company that can last forever, retain its long-term advantage, and grows our wealth. I never tire of […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[571,5949],"tags":[],"yst_prominent_words":[],"_links":{"self":[{"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/posts\/10680"}],"collection":[{"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/comments?post=10680"}],"version-history":[{"count":3,"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/posts\/10680\/revisions"}],"predecessor-version":[{"id":24361,"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/posts\/10680\/revisions\/24361"}],"wp:attachment":[{"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/media?parent=10680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/categories?post=10680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/tags?post=10680"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/einvestingforbeginners.com\/wp-json\/wp\/v2\/yst_prominent_words?post=10680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}