In one of the earlier articles in our series, we identified six distinct sources of competitive advantages. This is the fourth article and focuses on consumer preference as the source of a sustainable competitive advantage.

This article is the first in a series discussing an assessment process for existence or absence of sustainable competitive advantages. In this article, we discuss the basic building blocks of an investment process designed to identify high-quality businesses: the entry and exit barriers.

Our rationality is limited by the information we have, the cognitive limitations of our minds and the finite amount of time we have to make a decision. Herbert A. Simon called that concept \"bounded rationality.\" As a consequence of these limitations, our confidence becomes unbounded. We will discuss the implications of this phenomenon and how investors can overcome it.

A simple three-factor quantitative process for selecting emerging-market high-quality stocks outperforms the publicly traded benchmarks and does so with lower risk.

Market participants have devised tools to value overall equity markets: the cyclically adjusted price to earnings (CAPE) ratio, Tobin's Q-ratio, the regression trendline, market capitalization-to-GNP (Buffett's valuation indicator) and the trailing price-to-earnings ratio. We summarize each one of these valuation tools and its implications for investors.

As U.S. corporate profit margins have made it to record highs, a debate has raged between those who place their hopes on a new paradigm of sustained high profits and those who believe in capitalism's efficiency and the tendency of margins to revert to the mean. We show that an often-cited explanation for the new paradigm - that the U.S. economy is more service-focused - lacks empirical support.

A basket of high-quality stocks generates significantly superior investment returns compared to publicly traded benchmarks, and it does so with significantly lower risk.