60North Investments Posted June 2, 2015 Share Posted June 2, 2015 This topic has been on the back of my mind for a long time now, and John Huber's post reminded me again of it. He mentions in his post a few examples, like Wells Fargo's ability to take in deposits cheaper than anyone else, or an obvious one with oil prices and oil companies. I tend to fall in the camp that believes in the power of finding these few key variables for different companies/industries, and focusing the analysis on understanding those first and foremost. Sure, things like management quality and integrity are important, and you can get hints regarding those from the smaller details. But I feel like without the understanding of what are the most important variables for this specific company to turn in decent profits, I'm standing on shaky ground. Because my key variable identification skills are no doubt lacking, I'd be curious to hear people's thoughts on how they go about recognizing the most important variables for different businesses. Do you use some form of a root cause analysis, going back step-by-step and eventually ending up with the "forest" / key variables? Understanding a wide array of different businesses is important, but I tend to think that's not necessarily enough. Thoughts? Link to comment Share on other sites More sharing options...
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