Business Model - The source of investment returns is "the fundamental economic

Secrets of Successful Companies Read in Nomad Investor Letter)

1) Business Model
- The source of investment returns is "the fundamental economic improvement of the business run by the investment company," not the stock price.
- "The source of all the wealth created by capitalism" is "the relationship that corporate employees have with customers through the company". This is the most important factor in determining the quality of the 'business run by a company'.
- "The underlying business model that produces success doesn't change that much and isn't that many."
-  It should be reviewed, analyzed, and reflected based on whether there is anything that can make a meaningful difference in the relationship that a company has with its customers.
- "It's fascinating that the business model that enabled us to build a Ford empire 100 years ago is the same as the business model that Sam Walton's Walmart in the 1970s, Hub Callacher's Southwest Airlines in the 1990s, and Jeff Bezov's Amazon empire today. It will build other empires in the future, too." (half-year letter from 2012)

2) the management team
- "If you look at the purpose of the investment in Nomad's prospectus, it says our job is to 'hand over control rights to the right person at the right price' and that 'approach requires patience' -- at least this is what investment is like for us." (Announcement in 2005)
- The "best entrepreneurs" not only get their personal wealth increase, but also "get meaning from the challenges and identity of work, creativity, decency, etc."
- Proper capital allocation by management is important to overcome the obsession with diversification and growth and increase the likelihood of reaching future destinations.
- A good company is "a company made up of shareholders who believe that the company will be good at allocating their capital, which is to give up the act of buying and selling stocks on their own."
- Companies that have the power to choose "tightening" and "huge investments in contrast to threatening business cycle conditions" so as not to drop their profit margins when everyone shouts the need for growth.

3) Sharing economies of scale
- "We're all very interested in profit margins, but we shouldn't pursue them at the expense of our philosophy. They need to be driven by better purchases, emphasis on the products we want to sell, operational efficiency, lower markdowns, higher turnover, etc. If we increase sales and justify it on the basis that we're still "competitive," we'll be as alert as many companies that have done the same thing. Instead of thinking about how much more we can get as we are, let's focus on how much cheaper we can give our customers. When the race is over, the Fed Mart will still be there to focus on." (Annual Letter from 2010)
- "The economic sharing model of scale is quite different. As a company grows in size, it returns cost savings to customers in the form of lower sales prices. Customers repay by purchasing more products, and retailers (suppliers) who have become larger also return the savings to customers. Hurrah! That's why companies like Costco earn four times as much sales per square foot as in an extremely average supermarket. Economic sharing strategies at scale encourage customer payback, which is a critical component of business performance." (Annual Letter 2008)

4) corporate moat
- "Companies that have processes that enable them to do so many things a little better than their competitors are less risky than those that do just one big thing. This is because the future success is more functional. Simply put, it's not easy to beat. If it's not easy to beat, it's actually going to be a very valuable company." (half-year letter from 2010)
- Companies that enjoy high profitability thanks to their pricing power are in danger of losing their profit margins soon because those high returns are "an incentive to bring in new competitors."
- Not only the existence of a corporate moat itself, but also its persistence and longevity are important.

5) robust ratio
- The robust ratio devised by Nomad is "the value divided by the share distributed to customers and employees divided by the share distributed to shareholders."
- "The higher the robustness ratio, the more difficult it is to compete in the same way as Costco. The higher the robustness ratio, the more unequal distribution of rewards to the business system between customers and shareholders. The economic moat on one side and the compensation distribution on the other are in a tight standoff" (half 2005)

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