The difference between a good business and a good investment

A good business is a company that generates profits. A good investment is the investment that grows significantly better than the market on average. If a company (Apple) exceeds another company (Microsoft) in market capitalization (i.e. it’s a better investment), but their profits don’t catch up, that means that the investment growth is based on faith. The faith that Apple will eventually generate better profits than Microsoft. That might happen or might not. And if that doesn’t happen soon enough, the investors will be disappointed and they will punish Apple’s capitalization. Simple as that.

Despite all the criticism, Microsoft is a very innovative company. They created tablet PCs, ebook readers, and Windows Mobile ten years ago. Too bad these things were too early for that time.

They created this 5 years before iPad:

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3 Responses to The difference between a good business and a good investment

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  2. […] The difference between a good business and a good investment « Lessons to be learned […]

  3. […] was a marginal company only a few years ago. Apple passed Microsoft in market cap in 2010, passed Microsoft in revenues in October 2010, passed Microsoft in profits just […]

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