Saturday, 25 February 2012
What Warren Buffett says about Commodity Companies
Warren Buffett does not like to invest in what he calls commodity companies - companies whose product does not differ from that of competitors in any significant way.
A company like this can be vulnerable to the actions of competitors and have limited power to raise prices to retain their profit position in the light of inflation.
Warren Buffett said this in 1982:
‘[Where] costs and prices are determined by full-bore competition, there is more than ample capacity, and the buyer cares little about whose product or distribution services he uses, industry economics are almost certain to be unexciting. They may well be disastrous.’