There was a good article in Investors Chronicle two weeks ago. It covered a book by Peter Seilern entitled “Only the Best Will Do”. This is one of the few books on investment I admit to not having read. But the IC review makes it look like the author has very much the same approach to investing as I have developed over many years (and is documented in my own book “Business Perspective Investing”).
Peter Seilern gives his ten commandants of quality growth investing as follows:
- Scalable business model.
- Superior industry growth.
- Consistent industry leadership.
- A sustainable competitive advantage.
- Strong organic growth.
- Wide geographic or customer diversification.
- Low capital intensity and high return on capital.
- A solid financial position.
- Transparent accounts.
- Exceptional management and corporate governance.
Finding companies that match all those criteria is not easy but when there are thousands of listed companies to select from why invest in lesser quality businesses? You just have to make sure you don’t overpay for the good ones.
Note the lack of emphasis on buying cheap businesses, i.e. those on a low p/e or paying high dividends. It’s more important to pick quality businesses that will outperform in the long term.
Mr Seilern founded his own investment management company in 1973 which has had a good track record in terms of performance, so his book might be a good one for summer reading.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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