A few weeks ago, I talked about how one of Warren Buffett's shareholder letters illustrated that fewer holdings can sometimes bring better results. To follow up, here are some other cases in which less can be more.

When negative is positive
The stock market's infatuation with same-store sales, or comps, can be a huge opportunity for intelligent investors. Some have made a bundle waiting for negative comps to hammer shares of stalwart retailers, such as teen apparel manufacturers Abercrombie & Fitch (NYSE:ANF) and Stock Advisor selection American Eagle Outfitters (NYSE:AEO), into the bargain bin.

But for various reasons, the comps metric is often meaningless. First, the time period it measures -- usually a month -- is way too short. Second, same-store sales often don't adjust for changes in capital spending, and thus don't correlate with returns on capital. Finally, companies account for comps in different ways, and they often don't acknowledge that new stores may take years to ramp up, vastly distorting comps results.

The best example of a previous "negative comps" opportunity is Sears Holdings (NASDAQ:SHLD). Sears seems to be a model of consistency in posting negative comps, yet its stock has roughly quintupled in the past four years.

How is this possible? Well, Sears was eliminating unprofitable sales, which helped it generate a torrent of cash flow. It used that money to buy back its own shares and shrink its capital base. Meanwhile, its real estate holdings have continued to appreciate.

Along those lines, investors might want to keep an eye on RadioShack (NYSE:RSH). Although the company has struggled recently, it's run by former Sears CEO Julian Day, and might present a similar opportunity.

When life gives you lemons...
Among hotels and restaurants, less can be more in a big way. In 2002, Julia Stewart became CEO of IHOP (NYSE:IHP) and announced the company would shift from an asset-intensive to an asset-light company. It planned to divest company-owned stores and let franchisees shoulder the heavy lifting of capital expenditures.

The plan worked to perfection, and IHOP's stock has nearly tripled over the past five years. Recently, IHOP agreed to acquire Applebee's (NASDAQ:APPB), in hopes of repeating the same successful formula there.

Hilton (NYSE:HLT) provides a similar success story. At the end of 1999, Hilton acquired a stable of hotel brands, including the Doubletree and Embassy Suites. That move kicked off its strategy of expanding via franchising, rather than building its own hotels, resulting in much higher margins and returns on capital.

Over the seven years following the deal, Hilton's owned hotel rooms dropped nearly 20%, while franchised hotel rooms increased almost 70%. In that same time period, Hilton's stock has nearly quintupled. The company's now being bought out by Blackstone.

Foolish thoughts
I still find it amazing that huge corporations pay so much attention to sales growth comparisons, and so little attention to returns on capital. Whenever you study a company, note whether it emphasizes the latter. If not, watch out; shares could be stuck in neutral for awhile.

On the other hand, if you notice that a company plans to switch from an asset-intensive model to an asset-light model, pay very close attention. Shares could be revalued upward as returns on capital and free cash flows improve.

Related Foolishness:

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool's disclosure policy knows where to look.