Common Sense Analysis #1- explained much better than me
I found this quote on-line from www.money.com. Fortune Magazine reporter Katie Benner interviwed the managers of Hodges Fund (5 year annualized return of 18.8% according to Moringstar).
In response to a question about investing strategies for a unpredictable 2007 market, the fund manager answers:
"We're a big proponent of pricing power. What allows a company to maintain or even increase its prices is a lack of competition, high barriers to entry and good demand. PC makers can never have pricing power because there's too much competition. Instead, we focus on businesses like railroads and steel, where there used to be a ton of competitors and now there are just three or four."
I note that the examples given, railroads and steel, are in regulated industries (you can't just put a train on the tracks without telling someone and steel is subject to pricing regulations and quotas). Its nice to have someone confirm my common sense analysis.
In response to a question about investing strategies for a unpredictable 2007 market, the fund manager answers:
"We're a big proponent of pricing power. What allows a company to maintain or even increase its prices is a lack of competition, high barriers to entry and good demand. PC makers can never have pricing power because there's too much competition. Instead, we focus on businesses like railroads and steel, where there used to be a ton of competitors and now there are just three or four."
I note that the examples given, railroads and steel, are in regulated industries (you can't just put a train on the tracks without telling someone and steel is subject to pricing regulations and quotas). Its nice to have someone confirm my common sense analysis.
Labels: Investment strategy
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