10 quality myths investors fall for

What if everything you thought you knew about quality investing was wrong? What if some of our most cherished beliefs about high-quality businesses aren't as rock solid as we think? Rupal J Bhansali, with her sharp contrarian lens, challenges the conventional wisdom of what constitutes quality in businesses. The founder and CIO of Double Duty Management, in her book 'Non-Consensus Investing', breaks down the most popular myths about what makes a business great and highlights some nuances that investors often overlook when it comes to spotting quality in business. Let's dive into some of her insights. 1) Competitive advantage is overrated Many investors hold competitive advantage as a cornerstone of quality investing. Bhansali, however, calls this a "misnomer". She argues that a true indicator of long-term quality is a company's ability to adapt and thrive in changing circumstances, what she terms a "Darwinian advantage". She explains, "A so-called competitive advantage will take you only so far. To succeed, you cannot have just one ace up your sleeve; you need many intertwined capabilities. That is your Darwinian advantage." She cites the example of Kodak versus Fujifilm. Kodak, once a dominant leader, failed to evolve in the face of digital photography. Fujifilm, on the other hand, adapted and leveraged its diverse capabilities to stay relevant. Bhansali notes, "Competitive advantage focuses mostly on barriers to entry, which may prove short lived. Darwinian advantage is about continuously raising the bar not just on barriers to entry but also on barriers to success." 2) The myth of market share While many investors place high value on market share, Bhansali contends that growing market share, not merely having a large

This article was originally published on March 01, 2025.