"If we're going to hold for a long period of time, we're looking for a deep, sustainable advantage."
Sustainable Competitive Advantage
Why is this an important trait?
When a business has a sustainable advantage, it allows investors to play the long game. When you confidently hold a company for 3-5 years, it sets you apart from those constantly trading in and out of positions.
There are several types of advantages. Here are 4 examples:
Patent protection
Inept competition
Visionary leadership
Business momentum
Patent Protection: Provides a lead for businesses looking to advance a particular technology.
Business momentum: When a company grows quickly, it can capitalize on the momentum by gaining market share and introducing new products/services.
Visionary Leadership: Having the most intelligent person in the room in a particular industry can serve as a tremendous advantage. Look for dreamers and builders.
Inept competition: Are the other competitors in the industry executing poorly?
Example: Axon Enterprise $AXON
Axon is well known for its non-lethal weaponry (tasers) and bodycams. They have multiple advantages. Let's look at two of them:
Inept competition: Axon has over 90% of the market share for body cams in the United States. They are so dominant that they don't have a worthy competitor.
Business momentum: Axon has capitalized on its dominating market share by selling software to complement its hardware.
References:
Six traits of a Rule Breaker Stock