On the Hunt for Great Companies
An Investor's Guide to Evaluating Business Quality and Durability
By: Simon Kold
Essential investment guide to perform sophisticated practical analysis on long-term business quality An unparalleled practical training tool for investment analysis, On the Hunt for Great Companies: An Investor's Guide to Evaluating Business Quality and Durability helps readers move beyond using rules of thumb for companies or investment hypotheses based on broad-level pattern recognition and instead start using a more thorough approach through sophisticated empirical analysis. Readers will learn how to assess all the essential traits of a good business, including passionate management, staying power, abnormal reinvestment options, low dependency risk, and to identify emerging quality. This book is supported by a wealth of real-world examples, both contemporary and historical, detailed original illustrations, and true business stories and anecdotes from investor and former comedian Simon Kold. In this book, readers will learn about: Elements of intense and durable competitive advantage such as scale economies, switching costs, network effects, brands, proprietary resources, and modest value extraction Methods to formulate falsifiable test statements and empirically test those predictions, rather than relying on heuristics or box-checking Incorporates memorable investment advice through Kold’s trademark humorous style Detailed, sophisticated, and highly actionable, On the Hunt for Great Companies is an essential for professional investors of all sizes, in all industries, in both public and private markets.
AI Overview
Title: "On the Hunt for Great Companies: An Investor's Guide to Evaluating Business Quality and Durability"
Author: Simon Kold
Publication Date: October 29, 2024
Overview:
"On the Hunt for Great Companies" is a comprehensive guide written by Simon Kold, the founder of Kold Investments, aimed at helping investors evaluate business quality and durability. The book provides a practical toolkit for investment analysis, focusing on 17 different aspects of business quality that investors should consider when assessing a company's long-term potential.
Key Themes:
Business Quality Evaluation: The book emphasizes the importance of evaluating a company's quality through empirical analysis rather than relying on heuristics or box-checking. It covers various traits such as passionate management, staying power, abnormal reinvestment options, and low dependency risk.
Competitive Advantage: Kold delves into the elements of intense and durable competitive advantage, including scale economies, switching costs, network effects, brands, proprietary resources, and modest value extraction.
Emerging Quality: The book discusses the concept of emerging quality, which refers to companies that are still in the process of expanding their competitive advantages or exercising reinvestment options that distort their consolidated economics. These companies may not yet have high return on invested capital but show potential for future growth.
Investment Philosophy: Simon Kold's investment philosophy is centered around identifying companies with scale benefits on either the demand or supply side, such as network effect leaders or scale-economies-shared cases. He also emphasizes the importance of passionate management and long-term incentives in management compensation.
Practical Guidelines: The book provides practical guidelines for research into the nuances of business quality. It includes methods to formulate falsifiable test statements and empirically test those predictions, making it a detailed and sophisticated guide for professional investors.
Plot Summary:
The book is structured to guide readers through a thorough evaluation process of business quality. It begins by introducing the concept of business quality and its importance in investment decisions. Kold then outlines the 17 traits of business quality that investors should consider, including passionate management, staying power, and abnormal reinvestment options. The book is supported by a wealth of real-world examples, both contemporary and historical, along with detailed original illustrations and true business stories and anecdotes from Simon Kold's experience.
Critical Reception:
The book has received positive reviews from both professional investors and readers. Here are some excerpts:
Professional Analyst's Perspective: The book is praised for its detailed and sophisticated approach to evaluating business quality. It is recommended for young equity analysts looking to develop their own frameworks for understanding businesses and their quality.
Reader Reviews: On Goodreads, the book has received high ratings, with reviewers praising its high real-world investing application and analyses. One reviewer noted that the book makes you think in a more structural way, even though a company can't fit all criteria, it makes you evaluate the positives and negatives.
Educational Value: The book is seen as an essential guide for professional investors of all sizes, in all industries, in both public and private markets. It is noted for its practical training tool for investment analysis, helping readers move beyond using rules of thumb for companies or investment hypotheses based on broad-level pattern recognition.
In summary, "On the Hunt for Great Companies" is a comprehensive guide that provides a structured approach to evaluating business quality, making it an essential tool for professional investors. Its practical guidelines, real-world examples, and detailed analysis make it a valuable resource for anyone looking to assess the long-term potential of a company.