Growth investing

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9. Competitive advantage

Investors sometimes forget that when they buy shares they aren't buying certificates to adorn a study wall - they are buying a part of a business.

'Competitive advantage' is all about judging the strength of a company in its market - whether it can increase its sales and profitability in the face of competitive pressure.

As well as screening the performance statistics of a company, all the great growth investors take an interest in the actual business.

Michael Porter, author of a book called 'Competitive Advantage', has this to say:

1. Don't invest in a business in a highly competitive industry where me-too operators will drive margins and profits through the floor.
2. Make sure the business has pricing power over its suppliers and customers.

Those factors are common sense. But what about examples? It used to be quite easy. You looked for a strong brand name, or a dominant distribution network, patented technology, or a certain uniqueness, and you came up with names that looked impregnable like . . . Marks and Spencer.

Hmm . . competitive advantage ain't what it used to be.

1. What is a growth stock? 2. Comparison with value investing 3. Traditional characteristics of a growth stock 4. Anatomy of a growth stock - Peter Lynch 5. Ten dos and don'ts from Peter Lynch 6. Jim Slater - The Zulu Principle 7. Earnings growth 8. The PEG factor 9. Competitive advantage 10. Do growth stocks have to be small? 11. A short diversion into internet stocks 12. When to sell a growth stock 13. Other factors 14. Case study of a growth stock - Sage 15. Conclusion

• Valuegrowth Investing - an Investor's Guide
• One Up on Wall Street