John Huber of Saber Capital Management published a letter and slide deck with his thoughts on business moats (competitive advantages).
The idea is to also evaluate a competitive moat from the customer's perspective. The recent competitive disruption of the men's shaving market provides a great example.
The point here is not that Dollar Shave Club (if it were publicly traded) would make a good investment. That company in particular may or may not be able to produce lasting profitability, and to produce lasting customer value, you need to stay in business. The point is to think about investing in companies that have a durable business model that can produce both stable profitability and significant value to customers. Companies that achieve the former by extracting value from its customers are doomed to be attacked by someone who will find a way to provide better value. In summary, I think it’s helpful to keep the following concept in mind: Value to the customer is one of the most important things to consider when analyzing companies.
You can find the letter to clients here:
And the full slide deck here:
And another letter from May: Saber Capital Letter: the Most Important Moat