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What is a durable advantage and why is it so important when considering stocks? | Preston Hudman's VERIFIED BLOG

 

What is a durable advantage when it comes to stocks.

 

Author: Preston Hudman  (Owner)

 

What is a Durable Advantage?
A durable advantage is a competitive advantage that a company has that is difficult for competitors to replicate or overcome. This advantage typically arises from a unique set of assets, capabilities, or processes that allow the company to consistently outperform its peers.

A durable advantage can come in many forms, but the most common types include:
Brand - Companies with strong brands have a loyal customer base that is willing to pay a premium for their products or services.
Network effects - Companies with network effects have a product or service that becomes more valuable as more people use it (e.g. social media platforms).

Scale - Companies with scale have the ability to spread fixed costs over a large number of units, leading to lower costs per unit and higher profitability.

Intellectual property - Companies with strong intellectual property (e.g. patents, trademarks, copyrights) have legal protection for their innovations and ideas.

Switching costs - Companies that have high switching costs (e.g. it's difficult or expensive to switch to a competitor's product) have a captive customer base.

How Does a Durable Advantage Provide a Moat?
A durable advantage provides a moat by creating a barrier to entry for competitors. If a company has a unique set of assets, capabilities, or processes that allow it to outperform its peers, it's difficult for competitors to replicate that advantage quickly or easily.
This means that the company with the durable advantage can maintain its market share and profitability over a longer period of time, even in the face of competition. As a result, the company can reinvest its profits into further improving its advantage, creating a virtuous cycle of growth and innovation.

Investors often look for companies with durable advantages because they are more likely to generate consistent returns over the long-term. However, it's important to note that no durable advantage lasts forever. Companies must continue to innovate and improve in order to maintain their advantage and stay ahead of the competition.

 

Preston Hudman is an investor as well as a digital marketer and he has owned several busineses of varying success before founding his current company callled Verify Growth that primarily makes money through passive income revenue streams as well as Preston's Influencer marketing efforts. Preston has recently been investing is stocks and learning the ropes and now is sharing what he has learned with the people who visit his blog. Please follow Preston on tiktok@prestonhudman

 

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Business Moat: a Durable Competitive Advantage That Increases the Odds of Your Investment Success (ruleoneinvesting.com)