Quotes from Lawrence A. Cunningham

What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know.

Common sense is the heart of investing and business management.

What, then, is Berkshire's moat? The answer: Berkshire's distinctive corporate culture. Berkshire spent the last five decades acquiring a group of wholly owned subsidiaries of bewildering variety but united by a set of distinctive core values. The result is a corporate culture unlike any other. And this is Berkshire's moat.

companies that tie up very little extra working capital with incremental sales tend to be more attractive.

we are confident that the fundamental principle of long-term ownership of quality companies is a sensible one, new

David Ogilvy: "If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But, if each of us hires people who are bigger than we are, we shall become a company of giants.

To achieve sustained high returns on capital requires possessing features that protect returns from competition; namely, competitive advantages. Identifying what these competitive advantages are and understanding their sustainability is an essential part of the quality investment process.

Asset-light industries are attractive since they require less capital to be deployed in order to generate sales growth. The finest examples are franchise operations, such as Domino's Pizza, where growth is funded by franchisees rather than by the company. Other

high capital intensity companies can also be attractive, especially where the capital requirement confers stability and deters entrants.

Gross profit margin demonstrates competitive advantage: it is the purest expression of customer valuation of a product, clearly implying the premium buyers assign to a seller for having fashioned raw materials into a finished item and branding it.

sustained high gross profit margins relative to industry peers tends to indicate durable competitive advantage. Zeroing

best businesses to own are those in which end markets are growing rather than shrinking. Absent

Opportunities for growth maximize the benefits derived from high returns on capital. Such opportunities can arise from market growth, either cyclical or structural, or through a firm grabbing share from rivals in existing markets or expanding geographically. The very best companies enjoy a diversified set of growth drivers through ingenuity in the design of products, pricing, and product mix.

The value any business creates, listed or not, is determined by the rate at which it deploys incremental capital. And

Valuation premiums of quality companies often reflect some degree of expected operational outperformance, but actual performance tends to exceed expectations over time. Stock prices thus tend to undervalue quality companies.

Culture, more than rule books, determines how an organization behaves.

financial statements classify advertising costs as expenses, they are often better conceived of as investments. This reclassification makes sense because advertising is also a far more flexible expenditure than most costs. Amid challenging economic times, advertising can be scaled back relatively quickly, adding agility to protect and manage cash flows. However

Given the specialized niche and deal size, there is scant competition in this acquisition market, enabling Essilor to purchase companies on attractive terms (such as six to seven times cash flow). This ability to systematically improve the operations of acquired businesses is rare but can create significant value.

much diversification is really diworsification.