This is the ultimate moat. When a dominant local firm spreads its fixed costs over a massive, captive customer base, a new entrant cannot compete on price without losing massive amounts of capital.
Search for the "Columbia Business School Heilbrunn Center" lecture notes to accompany the PDF. The combination of Greenwald’s textbook plus his 1-page valuation worksheet is the closest thing to an MBA you can get for free.
When comparing a "good business" to a "bad business," a good business derives most of its intrinsic value from its earnings power and growth, which are protected by a durable economic moat. Comparing a company’s Earnings Power Value (EPV) to its Net Asset Value (NAV) tells you if a moat exists: if EPV is greater than NAV, the company has a competitive advantage. This franchise value is not just theoretical; Greenwald demonstrates his framework with practical examples of companies including Hudson General, Magna International, WD-40, Intel, and Wells Fargo, as detailed throughout the book. value investing bruce greenwald pdf
Value investing remains one of the most enduring strategies in the financial world. While Benjamin Graham laid the foundation and Warren Buffett popularized the philosophy, Columbia Business School Professor Bruce Greenwald modernized it for the 21st century.
Exists only when EPV is substantially higher than Asset Value. Identify customer captivity or local economies of scale. Only valuable within a protected franchise. This is the ultimate moat
Greenwald emphasizes that in a competitive market, capital flows to high-return areas, eroding profits. A company with a sustainable competitive advantage ("moat") can resist this erosion. He categorizes advantages into three main types:
Management is wasting assets; the business is destroying value unless liquidated or turned around. Perfectly Competitive Firm The combination of Greenwald’s textbook plus his 1-page
Only buy if the price is substantially below the EPV (or lower than the Asset Value for distressed situations). 4. Key Takeaways from the Greenwald Philosophy