Without leverage, the most you can lose on an investment is 100% (and that is also rather unlikely), but you can make multiples from a winning stock. 

Therefore, rather than figuring out what to avoid when making an investment, I think a far better ROI can be had by learning what makes a winning stock instead.

I always tell students in business school they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision, they used up one of their punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five or three or seven, and you can get rich off five or three or seven. But what you can’t get rich doing is trying to get one every day.

— Warren Buffet

NVR is a homebuilder. Their operating model, which is unique (and which is described later), allows them to assume the least risk in the industry and produce returns that are the largest. 

Homebuilders are generally dismissed because they're cyclical and interest-rate sensitive (really, though, which industry isn't?) and downturns inevitably leave homebuilders holding large inventories of unsold properties -- the unlevered builders then suffer large inventory writedowns while the levered builders go into bankruptcy. However, NVR's model will prevent it from suffering the same fate and, indeed, NVR will prosper in a downturn at the expense of the weaker builders. 

Two of the most important facets to its operating model are: 

(1) NVR acquires control of land inventory through options contracts. These contracts give NVR the right to buy finished lots from developers. NVR secures a supply of land for its homebuilding operations through the use of these options whereas other homebuilders purchase land outright and engage in land development. By avoiding that speculative practice of land  purchase/development, and instead using options, NVR is able to control large blocks of land (years' worth) in its markets while employing less capital to do so. The lower capital requirements of this method translate into lower inventory risk and greater returns on capital. 

(2) NVR pre-sells nearly all of its homes. Other homebuilders typically participate in some speculative construction. NVR does not. Before NVR begins construction, an order must be placed and a deposit made. This practice reduces risk and working capital requirements, which further enhance returns on capital. 

In addition to NVR's superior model, consider the following: 

NVR's profits and market dominance are all the more amazing when you remember that the results have been achieved without land development. NVR has margins better than its competitors despite the fact that other homebuilders benefit from the gross margin boost of speculative development in an inflationary environment.

Catalyst

The small number of shares outstanding occasionally creates large downward gaps. NVR's recent 25% drop is one such opportunity. 

Also, share repurchases will continue to drive the stock. It's hard to overemphasize the magnitude of the repurchases or the wonderful track record of buybacks: 

12/31/95: 15.21 (millions of shares outstanding) 

12/31/96: 13.57 

12/31/97: 11.09 

12/31/98: 10.39 

12/31/99: 9.17 

12/31/00: 8.86 

04/18/01: 8.14