Successful companies have mostly focussed on small niches within a much larger market.
They have been able to build market dominance in their
- niches,
- command pricing power,
- expand the niches and
and returns on capital.
The financial performance of consistent compounders has been clearly better than:
(a) most mass-market companies; and (b) diversified large corporations
For stock price to grow in consistent compounding stocks ,
Earnings drive 80-90% (if not higher) of the stock returns generated over the long run.
As a result, provided the underlying asset (company or an index) delivers a modest or healthy earnings growth,
it does not matter whether the entry point of one investor was 20% higher or lower than another investor.
To be continued...
Inspired from Marcellus
Marcellus 2
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