Beyond the numbers: what makes a great investment?

But unfortunately, we don't usually get exactly what we want.

So the way I often describe it is we want...

We're greedy.

We want as much quality as possible, as much value as possible, and as much growth as possible.

Um, and as you say, there's normally a, a trade-off, so the best quality, fastest growing companies tend to be quite expensive and vice versa.

And so ultimately we want the best balance of those, of those three, three factors.

But let's, let's take them in turn.

So let's start off with, with quality.

When we, when we talk about quality for a company, for an equity, for a business, what are we talking about?

Well, ultimately with any investment that we buy, what we're really buying is a cash flow stream.

We're buying a cash flow stream from today through to judgment day ultimately.

That's really, as equity investors, what, what we will get-

Yep

...

when we buy an equity.

Now, one thing that we know about capitalism is that it's relentless in trying to eliminate profits from companies.

So every company that has found an attractive market opportunity or attractive market niche will have competitors trying to steal their profits.

Yeah.

You know, as Amazon founder Jeff Bezos famously said, "Your profit is my opportunity." And that's what we see relentlessly in capital- capitalism, competition trying to drive away, trying to drive profits out of the system ultimately.

Now, when we think about quality, what we're really looking for is reasons why the profits that a company are making will be sustainable over time, why that company deserves and is able to continue extracting those profits from, from the, you know, the, the ecosystem-

Mm

... from the products they produce, and why it won't be competed away.

That's really what we're looking for.

So quite often that comes down to business school term, barriers to entry, sustainable competitive advantages, something that means that the business is resistant to competition.

So perhaps discuss what kind of characteristics might lead, lead to that.