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Michael Mauboussin

Investment strategist and author known for work on competitive analysis, moats, and value investing

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Michael Mauboussin

Overview

Michael J. Mauboussin is a noted investment strategist and author, formerly with Credit Suisse and now with The Batman Capital Group. He is widely recognized for his work on competitive analysis, moats, and the application of strategic frameworks to investing.

Key Contributions

Measuring the Moat

Mauboussin developed a systematic framework for assessing the magnitude and sustainability of value creation, based on two dimensions:

  1. Return Spread — The gap between return on invested capital (ROIC) and the cost of capital
  2. Duration — How long the spread can remain positive (competitive advantage period)

Three Sources of Value Creation

Mauboussin identified three core sources of competitive advantage:

  1. Production Advantage — Cost or quality benefits in creating products/services
  2. Consumer Advantage — Customer loyalty, switching costs, brand power
  3. External Advantage — Favorable relationships or circumstances

Core Ideas

Competition Lifecycle

Companies typically pass through four stages:

  1. Innovation — Rapid ROIC growth, many entrants
  2. Return Decline — High returns attract competition, returns converge to cost of capital
  3. Mature — Returns equal industry average
  4. Below Average — Forces cause returns below cost of capital

Mean Reversion

"Mean reversion is a powerful force. Companies that generate returns significantly above cost of capital attract competition that erodes those returns."

Key findings:

  • Companies maintaining above-average returns for extended periods are rare
  • High absolute returns + high investment levels correlate with faster competitive erosion
  • Return persistence is shrinking across industries

Industry Analysis

Industry effects are most important for high-performing companies. For low performers, company-specific factors explain 90%+ of returns.

Moat Sustainability

"Economic moats are rarely stable. They either widen or narrow a little bit every day."

Buffett: "The key to investing is not assessing how an industry is going to affect society... but determining the competitive advantage of any given business and asking how long that moat can be widened and deepened."

Publications

Related Concepts

Source

Based on "Measuring the Moat" published by Credit Suisse, 2016.