Investors' Chronicle
Partner Content: Anatomy of a great company
Dec 12, 2024
Julian Bishop, co-lead portfolio manager of the Brunner Investment Trust, shares insights on the DNA of great companies. He discusses how management quality, culture, and customer insights drive success. Julian emphasizes the importance of asset-light models and industry structure for sustainable competitive advantage. He also highlights the necessity of trend awareness, illustrated by Microsoft's transformation in cloud computing. Finally, the conversation touches on how a robust company culture fosters resilience, essential for long-term stability and success.
17:16
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Quick takeaways
- Quality companies excel in value creation through asset-light business models, as demonstrated by Autotrader's high returns on low capital expenditures.
- Risk management is enhanced by predictable revenue streams and low debt levels, exemplified by Microsoft's subscription model and stable income.
Deep dives
Defining Quality in Companies
Quality in companies encompasses the dual aspects of value creation and risk management. Value creation is primarily about generating substantial returns on invested capital, and companies that excel in this often have asset-light business models. An example highlighted is Autotrader, which has a market cap of £7 billion but only £15 million in property, plant, and equipment, demonstrating exceptional profitability relative to its low capital expenditures. In contrast, larger companies like BP show high invested capital with comparably lower returns, indicating they haven’t created as much value in the eyes of the market.
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