How To Find A Stock With A Moat

August 3, 2007 by Joe Ponzio

Moat-one of the most important concepts in value investing. Every company has a value; but, the companies with big moats are generally less sensitive to outside forces which means you can invest with more confidence and comfort.

There are a million different types of moats. Some are economic; some are brand; some are position. Some are right in front of our faces; some require a bit of digging.

Still, when a business changes your native language, you’ve got moat. Want to look for something online? Google it. Want to listen to music? A few years ago, we had MP3 players. Today, the IPod. But not just Apple’s IPod, Microsoft has the Zune-you know, Microsoft’s IPod. (Microsoft’s Zune is losing to Apple’s IPod because of the “IPod Brand Moat”.) Need something-anything? WalMart’s got it. Even if they don’t, we’ll check there first.

Why was Buffett’s 1988 purchase of Coca-Cola a no brainer? Coke changed the English language. In 1988, if you wanted pop (soda), you asked for Coke.

Moat = increasing owner earnings. How long will that last? That’s the art of value investing. So long as the moat is strong, the business is strong.

Where do you find wonderful businesses? Everywhere. Start with the companies that have changed your life by changing your language.

P.S., Sorry for the late post!

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