We approach any proposed investment with a great deal of humility. We start from the premise that the future of a company is not knowable. Thus, there will always be a zone of ignorance. Our mission is to reduce that zone until it’s small enough to convince us that probability is in our favor.
Our analytical framework is different from Wall Street’s approach, which is modeled much like a casino’s. Because stock prices are readily available and change frequently, a casino mentality is created. The short-term gamble and cash-in can be an adrenaline rush; the gains can be whopping. Or crushing. In many stockholders’ experience, just as with casino gamblers’, the “house” is often the winner.
In our view, investing should be approached with an attitude of sober risk assessment. One of the major keys to that framework is researching and analyzing companies’ competitive “moats.”
Competitive moats: What they are and how we assess them.