Guess the stock S18｜The magic of oligopoly

Oligopoly is a market controlled by a few companies, and each player's decisions are likely to affect the others. Mohnish Pabrai, a famous investment guru, once talked with Charlie Munger about oligopoly, concluding that oligopoly is a good way for companies to keep decent profit margins and stay competitive together.

Case 1:

Take the HDD (hard disk drive) industry as an example. In the past 25 years, it was a terrible business with over-competition and bankruptcy until 3 main players were left.

Source: Jefferies, Gartner.

Along with the market consolidation, the EBIT margin of HDD leaders went up from -5% to 15%.

Source: Jefferies, Gartner, FactSet, company data.

As a result, the stock price of one of the market leaders has gone up 6 times in 10 years.

Guess the stock S18｜The magic of oligopoly

Case 2:

The company is one of the big four controlling the global tobacco industry. With an ROIC of more than 30% and a dividend yield of more than 5%, the company keeps entrenching from the effect of oligopoly.

Case 3:

Like many other industries, the railroad industry became a money machine for shareholders during the process of oligopoly.

Source: Association of American Railroads

There are 2 main players who control the US railroad industry. Berkshire acquired BNSF in 2010 for $44 billion. The other left is still trading on the market, as shown in the chart below：

How to attend?

Leave the stock tickers of the charts above.

Event Duration: Jan 19-22

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