IFB362: Why Some Stocks Always Seem Expensive

The Investing for Beginners Podcast - Your Path to Financial Freedom

Welcome to the Investing for Beginners podcast, episode 362. Today, Dave and Andrew explore the concept of competitive advantage period (CAP), a valuation tool associated with Michael Mauboussin. They'll discuss how CAP helps explain why certain businesses maintain higher valuations over longer periods and its implications for investors.

[00:00:32] Introducing competitive advantage period (CAP), a valuation concept associated with Michael Mauboussin's writings.

[01:08] CAP explained: Period where outstanding businesses maintain excess returns due to competitive advantages.

[02:38] CAP helps explain why certain companies have higher valuations for longer periods.

[04:09] Traditional 10-year DCF models may be too short for companies with strong moats.

[06:32] Scale economy shared: A self-reinforcing moat that strengthens as a company grows.

[09:40] Companies like Visa and Mastercard strengthen moats by working with potential competitors.

[15:24] Market may value companies differently based on expected duration of competitive advantage.

[17:42] CAP valuation must be logical; unreasonable growth projections can lead to absurd results.

Today's show is sponsored by:

Go to shipstation.com and use code INVESTING to sign up for your FREE 60-day trial.

Go to monarchmoney.com/BEGINNERS for an extended 30 day free trial!

Get two hundred fifty dollars when you join Ramp. Go to ramp.com/BEGINNERS

Start building your dreams with Bluehost.com

Find great investments at Value Spotlight

Have questions? Send them to [e-mail]

Start learning how to value companies here: DCF Demystified Link

SUBSCRIBE TO THE SHOW

Apple | Spotify | Google | Amazon | Tunein

Learn more about your ad choices. Visit megaphone.fm/adchoices