Plantation companies – you need more than an idiot to run it

Warren Buffet said that he “…tries to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”

It can be a challenge to identify such a wonderful business. One way is to hunt in wonderful sectors. These are industries that are relatively straightforward or have lower barriers to entry.

One way to identify such a sector is to look at the inter quartile range of the return trend. A sector with narrow range meant that all the companies in the sector have about the same performance. A wider range indicates that there are significant different strategies where management capabilities make a difference.

When you look at the ROA trends of the Bursa plantation companies, you can see the inter quartile range becoming wider over the past decade. This is a sector where management makes a difference.

Moral of the story? If you want to invest in Bursa plantation companies, you better look for the wonderful companies. These are those whose ROA fall in the upper quartile performance.