High-Powered Investing All-in-One For Dummies, 2nd Edition

Book VII

Value Investing

Five Intangible Signs of Value

• A franchise: Market power is tantamount to lasting earnings power, and a franchise (a market position that's difficult or impossible to duplicate) is the cornerstone of market power. An obvious, defensible franchise puts a company in a much better position to preserve and grow value.
• Price control: A company in control of its product prices probably possesses franchise power and is using it effectively. A company that markets its products and competes on virtues other than price has good market position. That company is more likely to preserve and grow future profit margins.
• Market leadership: Market share is important in achieving price control and economies of scale in producing, marketing, and delivering products. A company with a large market share has an advantage, while companies with a small or declining market share must pay up just to catch up.
• Candid management: Strong management and good leadership are often obvious just from a company's behavior. Management that communicates with the press, with shareholders, and with its customers is probably doing a good job and has nothing to hide.
• Customer care: Companies that appreciate the value of their customer base and capitalize on that value are better positioned for long-term success. These companies know their customers and treat them as something more important than advertising targets. They also can claim strong and unusual brand loyalty.

The master of value ...