Never Stop Learning Competitive Advantage is a Dangerous Thing to Juggle With

Altering Your Approach to Understand the Actions of Your Portfolio

Around 1982 it hit me that there were a lot of lousy stocks in my portfolio and I started wondering why. While it sounds like an obvious conclusion now, the common denominator of the losers was that they were in lousy businesses. I realized I should be more of a business analyst than a stock analyst, meaning that I had to better understand how companies themselves created value. I moved more away from classical stock metrics of P/E and book value to business metrics of return on capital and cash flows.