The Elevator Pitch Value Proposition

The value proposition of a publicly-traded company is the level of attraction of the enterprise's products or services to its customers. Put another way, what value does the product or service offer to current and potential consumers?

I think the value proposition of a business is often overlooked, or taken for granted by self-directed investors. Arguably, professional investors and analysts perhaps over-analyze the value proposition of a targeted company's products or services.

Here's my take on defining the value proposition of a publicly-traded enterprise and then confidently explaining it via an elevator pitch.

The Elevator Pitch Value Proposition

Can You Illustrate the Company's Value Proposition?

Perhaps my favorite quote on the importance of understanding what we are investing in without experiencing analysis paralysis, comes courtesy of the legendary stock-picker, Peter Lynch.

Never invest in any idea you can't illustrate with a crayon. -Peter Lynch

The thought came to Lynch after he observed a class of middle school students who formed an investment club under the direction of their teacher. Lynch noted that the student investment club's stock picks were collectively outperforming the S&P 500 Index by a wide margin.

Lynch and his student investors remind us that value propositions can and should be narrowed down to an elevator pitch that an investor can understand and communicate with ease.

I think the worse investment a stock picker can make is buying the shares of an enterprise that he or she has little or no idea of what and how it produces for the benefit of its target market.

The Elevator Pitch Value Proposition

Defining a Company's Value Proposition

Beyond what he or she may already know about an enterprise's products or services, a self-directed investor has a myriad of public information available to vet the company's value proposition. I argue that the most reliable information available lies in the company's SEC filings.

For example, The 10K Annual Report filed with the U.S. Securities and Exchange Commission, specifically the section titled Item 1 Business, is where management discusses the company's background, business strategy, specific products and services, markets and distribution, competition, supply chain, research and development, intellectual property, foreign and domestic operations, plus other related items specific to its industry.

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Disclosure: My family's portfolio is long DIS, JNJ, NKE, PAG, and TGT.

Disclaimer: David J. Waldron's articles, blogs, and podcasts are for informational purposes only. The accuracy of the ...

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