TY - BOOK AU - Kold, Simon TI - On the hunt for great companies: an investor's guide to evaluating business quality and durability SN - 9781394285747 U1 - 332.6 PY - 2025/// CY - Jersey PB - John Wiley & Sons, Inc. KW - Investments handbooks, manuals etc N1 - Table of contents: Acknowledgments xiii List of Figures xv List of Tables xix List of “Let’s Sniff Around” xxi Introduction 1 Part I What Makes Some People Create Exceptional Long- term Per-share Business Performance? 7 Chapter 1 Passion 9 1.1 Perseverance and Internal Motivations 11 1.2 Focus on All Stakeholder Constituencies 14 1.3 Decision- making Time Horizons 17 1.4 Career Path and Tenure 18 1.5 Retention of People 23 1.6 Authenticity Indicates Passion 25 Chapter 2 Long- term Incentives 35 2.1 Board of Directors 38 2.2 Disincentives 40 2.3 Transactions in Own Shares 42 Chapter 3 Capital Allocation 45 3.1 Value- accretive Buybacks versus Buybacks 47 3.2 Hurdle Rates Should Be Determined by Alternatives 50 3.3 Value Destructive Acquisitions 52 3.4 Unsung Capital Allocators 53 3.5 Metrics and Vocabulary 54 Chapter 4 Reliable Communication 57 4.1 Past Predictions and Ex Post Outcomes 59 4.2 Genuineness as Indicator of Reliability 61 Part II What Makes Competitive Advantages Intense and Durable? 65 Chapter 5 Economies of Scale 73 5.1 Relative Scale and Relevant Market 75 5.2 Prohibitive Costs 76 5.3 Evaluating the Intensity and Durability of Economies of Scale Advantages 77 5.3.1 General analyses 77 5.3.2 Distribution network density 84 5.3.3 Purchasing scale advantages 86 5.3.4 Marketing scale advantages 88 5.3.5 Production scale advantages 89 5.3.6 Related concepts 90 Chapter 6 Switching Costs 93 6.1 Sticky Customers, Add- on Products, and “Cost of Switching” 95 6.2 Switching Cost Multipliers 97 6.3 Evaluating Intensity of Switching Cost Advantages 98 6.3.1 Costs of switching 98 6.3.2 The arbitrage of switching costs 100 6.3.3 Churn, retention, and cohorts 101 6.3.4 Risk of standardization 104 6.3.5 Risk of excessive value extraction 106 Chapter 7 Network Effects 107 7.1 Boundedness 110 7.2 Critical Mass and Relative Scale 110 7.3 Evaluating the Intensity and Durability of Network Effect Advantages 111 7.3.1 General analyses 111 7.3.2 Protocol network effects 122 7.3.3 Expertise ecosystem network effects 125 7.3.4 Two- sided networks 128 7.3.5 Data network effects 132 Chapter 8 Brand Advantages 135 8.1 “Identity Creating” or “Uncertainty Reducing” 138 8.2 Brand Time Constraints 140 8.3 Luxury Brands 141 8.4 Evaluating Brand Advantages 142 8.4.1 Brand benefits 142 8.4.2 The Lindy effect and brand longevity 143 8.4.3 Geographical boundedness 144 8.4.4 Analytical risk of over- interpreting brand loyalty data 145 8.4.5 Counterfeiting risk 146 8.4.6 Brand experience control risk 146 8.4.7 Brand dilution risk 146 Chapter 9 Proprietary Resources 149 9.1 Favorable Access to Raw Materials 150 9.1.1 Locking up favorable sources 151 9.2 Proprietary Technology 152 9.3 Favorable Locations 154 9.4 Favorable Government Treatment 157 Part III What Makes Some Companies Less Risky and More Valuable Than Others? 161 Chapter 10 Fair Value Extraction 163 10.1 Tapped and Untapped Pricing Power 165 10.2 Lack of Value Capture 169 10.3 Determinants of Choosing to Withhold Value Extraction 169 10.4 Risk of Extracting Excessive Value from the Supply Side 170 10.5 Evaluating the Risk of Excessive Value Extraction 171 Chapter 11 Staying Power 175 11.1 The Pace of Technological Change in the Industry 178 11.2 Exposure to External Foundational Technological Shifts 181 11.3 Cultural Embeddedness 183 11.4 Cost- effectiveness 184 11.5 Demographic Exposures 185 11.6 Exposure to Industry Channel Changes 185 11.7 Age of Technology/Product Category 186 11.8 Staying Power Versus Growth 187 11.9 Evaluating Staying Power 187 Chapter 12 Proven Business Model 191 12.1 Geographical Replicability 197 12.2 Expansion Investments 199 12.3 Lifetime Unit Economics 201 Chapter 13 Predictable Demand Drivers 205 13.1 Line of Sight of Revenues 208 13.1.1 Backlog of orders 209 13.1.2 Upgrade cycles and replacement sales 209 13.1.3 Contractual recurring business 210 13.1.4 Aftermarket services and spare parts 212 13.2 Predictability of Longer- term Industry Demand 213 13.2.1 Determinants of predictability beyond line of sight 213 Chapter 14 Reinvestment Options 217 14.1 Product Line Expansion 220 14.2 Territorial Expansion 222 14.3 Increased Capacity 223 14.4 Customer Acquisitions and Brand Building Investments 225 14.5 Buying Other Companies 226 14.5.1 Consolidations of fragmented industries 226 14.5.2 Cross- selling with switching cost multipliers 227 14.5.3 Acquihires 228 14.6 Lack of Reinvestment Options 230 Chapter 15 Scalability and Low Incremental Costs 231 15.1 Determinants of Marginal Cost 233 15.2 High Break- even Point 235 15.3 Scalability of Infrastructure 236 15.4 Operational Leverage Magnifies Cyclical Risks and Exit Costs 238 15.5 Capital- light Versus Capital- intensive Businesses 239 Chapter 16 Cyclical Risks 241 16.1 Cyclical Company: Good or Bad? 243 16.2 Degree of Cyclicality 244 16.2.1 Historical cyclicality 246 16.2.2 Historical managerial behavior 247 16.3 Minimizing Analytical Risks Caused by Cyclicality 248 Chapter 17 Other Risks 255 17.1 Dependency Risks 256 17.2 Diversity of Income Streams: Risks and Benefits 257 17.3 Leverage Risks 261 17.4 Geopolitical Risks 264 17.5 Regulatory Risks 265 17.6 “Unknown” Risks 267 Chapter 18 Final Remarks 271 18.1 Analytical Errors 273 18.2 Price Matters 275 18.3 Predicting Quality 276 Appendix: Banana Peels of Inductive Logic 281 Prediction Based on Past Experience 281 Argument from Cause 282 Argument from Generalization 283 Argument from Analogy 284 Argument from Authority 285 Anecdotal Argument 286 About the Author 289 Notes 291 List of Companies Profiled 301 Index 303 [https://www.wiley.com/en-us/On+the+Hunt+for+Great+Companies%3A+An+Investor's+Guide+to+Evaluating+Business+Quality+and+Durability-p-9781394285747#tableofcontents-section] N2 - Essential guide for detailed evaluation of business quality aimed at investors in both public and private markets A practical tool for investment analysis, On the Hunt for Great Companies: An Investor's Guide to Evaluating Business Quality and Durability helps readers analyze target companies in relation to 17 traits of business quality, as well as the nuances within them. Readers will learn how to empirically evaluate the 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: Practical guidelines for research into 17 nuances of business quality 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. (https://www.wiley.com/en-us/On+the+Hunt+for+Great+Companies%3A+An+Investor's+Guide+to+Evaluating+Business+Quality+and+Durability-p-9781394285747) ER -