Excerpt From Saber Capital Management (May 10th, 2017)
Investors should own businesses like that have light capital expenditures, infinitely scalable, high switching costs, and naturally conducive toward network effects. For examples: Google and Amazon’s ability to mine data across its properties.
The social media have cut the cost of bringing products to people and also reduced the time to remain present at many places. It has become important to invest in company that has long-term oriented management that is focused on adding long-term value to customers. Today consumers have better product information, varied options and value for money paid. It has become now easy for smaller companies to compete against big brands keeping low cost.
Amazon Founder Jeff Bezos said the following:
“The balance of power is shifting toward consumers and away from companies. The right way to respond to this if you are a company is to put the vast majority of your energy, attention and dollars into building a great product or service and put a smaller amount into shouting about it, marketing it.”
Strengthening Moat by Value Addition
It is important to keep in mind that: To analyze a company and its future prospects, it is highly needed to look for what Value is being added to the customer by the company’s products or services. For this, it is highly required to invest in those companies that have a sustainable long term business model that can produce profitability and also add value to customers. Companies that do not add value to its customers may come in problem and loose profitability to other company that is committed to provide better value.