But what has happened is that as technology has proliferated in the economy, these companies have become much bigger, and scale has turned out to be a big advantage in itself. For example, Intel built an incredibly large business. Not only could it design microprocessors better than its competitors, but it could also manufacture them on a scale that allowed it to drive the cost down to the point that computers became affordable for almost everyone. But a rate of revenue growth greater than those of your competitors is an indication that you're doing something different or better. So I look for rapid sales growth.
Most investors focus on earnings.
Another sign of a special advantage is an expanding market share. To me, this says the company is doing something different or unique or has a cost advantage. The third sign is profit margin. If you see a business with a high and rising profit margin, it essentially proves there's an advantage of some sort at work. If the company has a homogeneous product like everyone else's, or its cost structure is similar, the competition will take those high margins away and drive prices down.