Four Pillars

Buy Wonderful Businesses

Successful business people have been winners because they usually own companies that possess a few simple, but critical characteristics.

These include, An enormous sustainable competitive advantage against others in the same industry. They generate large growing streams of free cash flow (excess cash not needed by the company for ongoing operations). They are simple and understandable businesses. They have a high degree of predictability with repeatable consistent revenue streams, selling products or services that people will require now and in the future. They have a high return on invested capital – that is, they don’t require much capital or future capital expenditures in order to succeed.

A wonderful business is allowed to make mistakes – sometimes large ones – but the company survives such events because of the strength of the franchise. Such companies obviously differ significantly from an average business where competition and future revenue and cash flow streams are usually much less predictable.