Porter's five forces model and buffet's concept of moat

Buffet refers to the concept of moat or sustainable competitive advantage as one of the most critical factor in determining the returns for a long term investor (in addition to other criteria)

I have been reading porter's book 'on competition' and trying to get a better understanding of how to evaluate a company's competitive advantage for a long term investment.

The five forces model is very helpful in understanding the industry structure and kind of long term returns to expect in an industry. What i was able to 'understand' this time (have read the topic several times ) is that not all the factors are equally important and for an investor it is critical to asses which factors impact the industry and the company more and would influence the long term returns.

More important for a long term investor is to understand, how the five factors of competition will change and determine the future returns.

I am now trying the above exercise for some industries like FMCG/IT services / Banking etc . A good evaluation and insight into the trends would be far more useful that chasing some price targets or trying to predict the next quarter which in munger's words would be 'twaddle'

Porter's five forces model and buffet's concept of moat

Buffet refers to the concept of moat or sustainable competitive advantage as one of the most critical factor in determining the returns for a long term investor (in addition to other criteria)

I have been reading porter's book 'on competition' and trying to get a better understanding of how to evaluate a company's competitive advantage for a long term investment.

The five forces model is very helpful in understanding the industry structure and kind of long term returns to expect in an industry. What i was able to 'understand' this time (have read the topic several times ) is that not all the factors are equally important and for an investor it is critical to asses which factors impact the industry and the company more and would influence the long term returns.

More important for a long term investor is to understand, how the five factors of competition will change and determine the future returns.

I am now trying the above exercise for some industries like FMCG/IT services / Banking etc . A good evaluation and insight into the trends would be far more useful that chasing some price targets or trying to predict the next quarter which in munger's words would be 'twaddle'

Checking on britannia industries - further update

After the last post, i started analysing britannia further. Liked the following in the company then
- An ROE of 25 %
- almost zero debt
- growth in upper single digits
- A p/e of around 13
- Cash / investment on balance sheet of around Rs 100 / share
In addition the company has good brands, good marketing and distribution infrastructure and reasonable economies of scale.

However on doing a bit of detailed check , i realised that almost 40-50 % of the NP is other income from investment activities which makes the operating pe of almost 20-22 ( after

So the company no longer looks very cheap. in addition i cant get my hands around how the management proposes to use the cash flows. Its core business needs very little cash. They are doing buybacks ...but not much ( share count has come down by some 5 - 10 % ). So the company seems to be piling cash and putting it into various investment.

now the above situation although not worrying , does not excite me into putting my money into the company. Most likely i will watch the company for some more time, before doing something

so i guess its time to move the next company !!!

Checking on britannia industries - further update

After the last post, i started analysing britannia further. Liked the following in the company then
- An ROE of 25 %
- almost zero debt
- growth in upper single digits
- A p/e of around 13
- Cash / investment on balance sheet of around Rs 100 / share
In addition the company has good brands, good marketing and distribution infrastructure and reasonable economies of scale.

However on doing a bit of detailed check , i realised that almost 40-50 % of the NP is other income from investment activities which makes the operating pe of almost 20-22 ( after

So the company no longer looks very cheap. in addition i cant get my hands around how the management proposes to use the cash flows. Its core business needs very little cash. They are doing buybacks ...but not much ( share count has come down by some 5 - 10 % ). So the company seems to be piling cash and putting it into various investment.

now the above situation although not worrying , does not excite me into putting my money into the company. Most likely i will watch the company for some more time, before doing something

so i guess its time to move the next company !!!