Analytical Frameworks

These frameworks serve as thinking tools, each offering a different way to examine fundamentals. Their value comes not from rigid application, but from selective deployment to help answer specific investment issues. The goal is to extract useful insights while avoiding analysis that wastes time and creates noise.

INDUSTRY ANALYSIS

Porter's Five Forces:

  • Rivalry - competition intensity in current market

  • Supplier Power - who controls key inputs

  • Buyer Power - who captures value downstream

  • New Entrants - barriers protecting incumbents

  • Substitutes - availability of alternative solutions

Value Chain Analysis:

  • Input Dynamics - raw material to components

  • Process Efficiency - conversion cost advantages

  • Distribution Control - channel power dynamics

  • Customer Access - direct vs indirect

  • Value Capture - where profits concentrate

Industry Life Cycle:

  • Emergence - high investment

  • Growth - rising returns

  • Maturity - peak returns

  • Decline - falling returns

PESTLE - External Forces:

  • Political - government policy and stability

  • Economic - market conditions and dynamics

  • Social - demographic and cultural shifts

  • Technological - innovation and digital change

  • Legal - regulations and compliance rules

  • Environmental - climate and resource impacts

COMPANY ANALYSIS

Durable Competitive Advantages:

  • Network Effects

  • Platform Advantages

  • Brand and Reputation

  • Scale Advantages

  • Switching Costs

  • Customer Integration

  • Distribution Advantages

  • Resource Advantages

  • Cultural Advantages

The most durable competitive advantages are self-reinforcing and structurally embedded, making them difficult to replicate even with significant resources. These advantages tend to compound naturally over time, as each element strengthens the others to create an increasingly defensible market position. Companies that combine multiple advantages - like network effects with switching costs, or brand loyalty with scale efficiencies - build particularly resilient business models.

Less Durable Competitive Advantages:

  • First Mover Advantages

  • Process Advantages

  • Learning Curve

  • Data Advantages

  • Intellectual Property

Less durable advantages are typically execution-based and require constant renewal in dynamic markets. These temporary strengths erode without sustained reinvestment and vigilance, unlike the self-reinforcing nature of structural advantages.

Capital Intensity Characteristics:

  • Return Decomposition

  • Cost Structure Dynamics

  • Working Capital

  • Reinvestment Rate

  • Free Cash Flow

Management Assessment:

  • Strategic Clarity

  • Capital Allocation

  • Incentive Alignment

  • Execution Track Record

  • Communication Quality

MARKET ANALYSIS

Behavioral Analysis:

  • Sentiment Cycles

  • Information Flow

  • Time Arbitrage

  • Consensus Views

  • Narrative Shifts

PORTFOLIO MANAGEMENT

Position Sizing Framework:

  • Conviction Level

  • Loss Potential

  • Portfolio Correlations

  • Liquidity Profile

  • Catalyst Timeline

I’ll fill these out and cover more points over time.