Bruce Greenwald is a professor emeritus at Columbia University’s Graduate School of Business and an advisor at First Eagle Investment Management. He is also a renowned author and expert on value investing, corporate strategy, and globalization¹.
Greenwald’s stock selection process is based on the idea that investors should look for companies that have sustainable competitive advantages, or economic moats, that protect them from competition and allow them to earn above-average returns on capital. He also looks for companies that are trading at a significant discount to their intrinsic value, or the present value of their future cash flows²³.
Greenwald identifies four sources of competitive advantage that can create economic moats for a company, such as:
– Economies of scale, which occur when a company can produce goods or services at a lower cost per unit than its competitors, due to its large size and market share.
– Customer captivity, which occurs when customers are loyal to a company’s products or services, due to switching costs, habit, network effects, or brand recognition.
– Cost advantages, which occur when a company can produce goods or services at a lower cost than its competitors, due to factors such as location, technology, patents, or access to resources.
– Market niches, which occur when a company can serve a small segment of the market that is overlooked or underserved by its competitors, due to its specialized skills, knowledge, or reputation²³.
Greenwald also uses several methods to estimate the intrinsic value of a stock, such as:
– Asset value, which is the value of the company’s tangible and intangible assets, net of its liabilities.
– Earnings power value (EPV), which is the value of the company’s normalized earnings, assuming no growth and no reinvestment.
– Growth value (GV), which is the value of the company’s future growth opportunities, assuming they can be funded by retained earnings and earn the same return on capital as the current business²³.
Greenwald’s stock selection process is rigorous and analytical. He has shown that investors can achieve superior returns by investing in high-quality businesses that have durable moats and are undervalued by the market.
(1) Must be a ‘professional investor’ to do well picking stocks: Legendary …. https://finance.yahoo.com/news/must-be-a-professional-investor-to-do-well-picking-stocks-bruce-greenwald-141557388.html.
(2) Bruce Greenwald: How To Find GREAT Opportunities in The Stock … – YouTube. https://www.youtube.com/watch?v=QAnQtiLVY6E.
(3) Bruce Greenwald – Wikipedia. https://en.wikipedia.org/wiki/Bruce_Greenwald.