Dear Superinvestor Bulletin Follower,
I don't know about you but I love reading the quarterly and annual letters from the top hedge fund managers.
Hey, I know it isn't cool but there could be worse hobbies to have.
Here is a good one for you:
The fund is Coho Capital Partners. Over the last five years, Coho Capital has increased at 20.2% per year compared to 14.7% for the S&P 500.
Not too bad.
The 2016 annual letter linked above provides some interesting reading on "self-reinforcing" businesses. Here is a taste:
In our note about Amazon, we wrote about investing in businesses that are inevitable. Part of what makes a business inevitable is a self-reinforcing business model. Google is a great example. The company processes three billion searches per day. Every individual search refines future search results, further optimizing the accuracy of Google's search algorithm. This feedback loop continually strengthens the efficacy of Google's search product while simultaneously widening its competitive moat. Compare the virtuous circle of Google's business with the vicious cycle of a mining business: A mining company mines surface level ore first, but upon depletion must drill further into the earth incurring greater costs the longer it is in business. Thus, the business becomes structurally weaker over time.
There are not many self-reinforcing business models in the world, but of those available we feel there is a greater representation within the technology sector than any other segment of the economy.
The letter also takes a look at a number of Coho's current portfolio holdings.
Enjoy the read.
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Have a great day!
Editor, The Superinvestor Bulletin
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.