Peter Lynch, the gentleman that achieved 29% annual returns while running Fidelity’s Magellan Fund from 1977 through 1990, is famous for saying that you should never invest in any idea that you can’t illustrate with a crayon. A variation of this advice is that you should never own a business where it takes more than a few sentences to explain how the company turns a profit.
The highest-quality businesses can usually be explained quite simply.
Coca-Cola makes its profits by making syrup concentrates that allow them to make about $0.30 or so on every dollar once it is said and done.
Originally posted 2013-08-07 17:13:29.