Book Review | On The Hunt For Great Companies by Simon Kold

On The Hunt For Great Companies by Simon Kold

This book, which you could describe as an educational guide, does a good job of combining written theory with real-life examples and illustrations to demonstrate concepts that all point towards identifying quality companies. There is plenty of valuable content. The concepts explored, some in quite a detailed manner, will either prove useful in reinforcing ideas you may already know, or will provide a clear and concise understanding of new concepts which will help your investing journey.

The author systemically steps through a range of topics, including:

• The risks and benefits of diversity of income streams;
• How to minimise risk when looking at cyclical companies;
• Determining marginal/incremental cost profiles and what that can mean for a company’s quality;
• Business models that are proven vs those business models which aren’t;
• What makes a company’s competitive advantage durable;
• Capital allocation & what to look for in shareholder communications; and
• Analysing industry dynamics.

A key topic raised in this book is that there is no ‘perfect scorecard’. It might be impossible to find a company that ticks ALL the boxes. You will search in vain if that is what you are after. That being said, a quality company is likely to show quality in enough areas that truly matter and what truly matters will be different from company to company. The inverse of this is a reinforcement that there will always be an element of risk and unknowns when investing. The best you can do is position yourselves in companies you perceive to be of a level of quality which is high enough to withstand the unknowns whilst also being able to grow over the long term. Investing is more art than science!

Link to Book

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