- Even if the industry has wonderful growth numbers, profitability might remain out of reach.
- We’ll define and describe the industries long term investors should avoid.
Most of you are familiar with Warren Buffet’s comment on the airline industry in his 2007 letter to shareholders:
“The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
Now, most connect the above statement only to the airline industry. However, in a deflationary environment where our youngsters expect lots of things for free—think WhatsApp—and extremely low interest rates, there will be more industries where shareholder wealth creation will be difficult to achieve.
In today’s article, we’ll define and analyze some of these industries. More →