Thread by @investing_city

My notes from @mjmauboussin's "Measuring the Moat"

[THREAD]

Intro

First, industry. Then firm-specific.

3 Parts of Industry Analysis

1) Lay of the land
2) Structure
3) Innovation

1) Lay of the Land

a. Industry Mapping

Airlines Example

b. Profit Pools

Reveal value creation by industry

#1) Airlines Example
#2) Healthcare Example

c. Industry Stability

#1) Market Share stability
#2) Price Stability

2) Structure

a. Barriers to entry

b. Rivalry

- HH Index: reveals the concentration of an industry (higher the more concentrated)

3) Innovation

a. Sustaining (not disruptive)
b. Low-End (Southwest Airlines)
c. New-market (streaming)

Moving on to Firm-Specific Analysis

Two parts

1) Value creation
2) Firm Interactions

1) Value Creation = willingness to pay - opportunity cost

a. Value Chain

b. Production Advantages

4 Areas
- Distribution
- Purchasing
- R&D
- Advertising

Supply vs. Demand-side economies of scale

c. Consumer Advantages

- Horizontal Differentiation
- Experience goods
- Switching Costs
- Network Effects

Power of consumer advantages

2) Firm Interaction

a. Game Theory
b. Brands
c. Management Skill

Two levers:
- Better over cheaper
- Increase sales over lowering costs

Checklists to recap

Here is the PDF version of these notes

drive.google.com/file/d/1QKV_N3…