FA Center: Calling a company ‘great’ doesn’t make it a good stock

It is easy to identify successful companies, but hard to pin down the characteristics that make them successful. Why do some companies grow and prosper while others languish and fail? Why are some companies great while others are merely good, mediocre, or bad? These questions are asked and answered over and over again by business executives, management consultants, financial analysts, and investors, but their answers are usually wrong.

For example, in his best-selling 2001 book, “Good to Great: Why Some Companies Make the Leap and Others Don’t,” Jim Collins’ boasted that, “We believe that almost any organization can substantially improve its stature and performance, perhaps even become great, if it conscientiously applies the framework of ideas we’ve uncovered.

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