Chapter 1. Persistent Winning and Losing

Many companies perform better than their competitors for short periods of time, but few are able to sustain competitive advantage over a long period.[1] Saks, for instance, provided investors with a return of 28 percent in 2003, but its average annual return over 1993 to 2003 was just 3 percent. Similarly, Supervalu's stock rocketed up 78 percent in 2003, but over 1993 to 2003, it earned just 8 percent per year.

Natural parity is the condition that prevails in most industries. Dow Chemical, Du Pont, and Rohm & Haas, for example, delivered virtually the same average annual return to investors—between 10 and 12 percent—from 1993 to 2003. Kroger's 14 percent average annual return to investors from 1993 to 2003 ...

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