Barriers to entry in this industry are very significant. In addition to negotiating thousands of contracts with data providers and gaining access to several hundred thousands of data sites, an entrant would have to overcome investments in intellectual property.

A CEO’s responsibility is to create shareholder value. But a CEO’s job is to achieve that through earnings and increasing the moat around the increasing return on capital, growing business; not through stock manipulation.

In the quest for value, we seek gems that have collected the dust of confusion and misunderstanding.

Free Cash Flows (operating cash flows less capital expenditures) — is very important for several reasons.

Investors should ignore the debt-to-asset ratio and pay closer attention to interest coverage ratio or debt payoff ratios, which tell a more accurate story about a company’s capital structure.

Svenska’s lending practices are very conservative — loan-to-value for Svenska-generated mortgages is 55%. House prices would have to drop 45% before Svenska would start losing money on mortgages.

GoPro was a momentum stock that was riding a wave about to break.

RX has incredible operational leverage since the bulk of its costs are fixed, with the exception of consulting. Operational leverage coupled with high sales growth should help to lift profit margins.

Companies that are run by owner-operators that have a high return on capital and a long growth runway.

I think of quality as a spectrum of light: black and white and color. Black and white are the fundamentals — the essential craftsmanship. In research, it’s building financial models where we stress test every assumption. The color is more elusive — where art lives.

I like Warren Buffett’s definition of quality: if the stock market was closed for ten years, would I be comfortable holding this stock?

Quality is multiplicative, not additive. Like multiplying numbers, one zero brings the whole product to zero. One poor surface can undermine everything.

High Return on Capital (and economic value added returns) far exceeding the cost of capital, another scorecard for value creation.

Despite Apple’s earnings rising from $37 billion to $57 billion, its book value declined from $123 billion to $78 billion. For every share repurchased at $50 with book value of $1, you automatically create negative $49 in book value ‘destruction.’ So it’s completely meaningless.

A deep moat around its business often created by strong brands, high barriers to entry, patent protection etc — allowing a company to have a leg up against competitive threats.

Most important, there are no switching costs for consumers.

Large financial institutions appear unanalyzable. In fact they are more like highly leveraged hedge funds and, as with hot dogs, you don’t really know what goes into them. Without proper analysis, one cannot assess risk or determine valuation, reducing ownership to speculation.