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I recently listened to a conference call by an investment manager I hold in high regard. His investment style can be best described as “high quality”. This is in contrast to the traditional “value” manager who searches for unloved stocks the market has pushed to unjustifiably low multiples of earnings or book value. It is also in contrast to the typical “growth” manager, who is prepared to pay high multiples to buy (often less well-established) companies that are growing their revenues or earnings (better yet, both) at very high growth rates.

The high-quality manager typically invests in high-quality businesses with durable franchises that grow their revenues dependably at GDP-plus rates and, due to operational leverage, their operating profits at a slightly quicker rate than this...

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