The Thoughtful Investor
Analyzing Secular Growth Stocks
The section concludes with this Chapter, which lists the points made while analyzing companies with long-term growth such as consumers, IT, and pharmaceuticals.
Pricing power - If a company can raise its prices by 6-8% per year or maintain its prices while the input costs are low. However, business expansion is more important because prices can only be raised only till a certain point.
Breaking the product down into smaller sizes is an excellent way to keep customers. As the price of the products falls.
Some characteristics of a long-term growth company include:
- Expensive as compared with stocks from other sectors.
- Long-term business viability, for example it’s not easy for a company like Nestle or a Colgate to go out of business.
- Generating free cash flow and low in capital expenditure as these companies throw back lots of cash dividends to its shareholders.