Why very few companies are capable of sustaining a high return on capital?
Three reasons why very few companies are capable of sustaining a high return on capital over a long period of time:
1. Economic downturns - few companies are resilient to these due to exposure to commodities and interest rates (eg banks and energy companies).
2. Reinvestment opportunities - companies lacking reinvestment oppportunities typically pay out a large chunk of their earnings as a dividend, rather than reinvest (eg consumer staples).
3. Pricing power - few companies are capable of raising prices without losing sales to their competition. $S&P 500(.SPX)$ $NASDAQ(.IXIC)$ $DJIA(.DJI)$
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