Economic Moat is a term used by Warren Buffett to describe a business' monopoly in their market.
Good examples would be Coca Cola, McDonalds or Starbucks in the US and GSK, Unilver, BP in the UK.
These are companies that have built for themselves, and their shareholders, an impregnable position in their market.
A position that it would be difficult for competitors to break into.
Their advantage could be brand . It could be quality. Or it could be cost. Or some other type of uniqueness.
The term 'Economic Moat' used by Warren Buffett is a great analogy. It conjures up pictures of a castle surrounded by a moat. With that moat wide and deep and protected by swarming alligators. Impregnable.
In another web page Durable Competitive Advantage you will discover what a company with an Economic Moat is.
Warren Buffett has spent his whole life looking for this kind of company. And when he finds one - he monitors it.
Which means that he puts it on his Watchlist.
Why would he do that?
Because he realises that the big profits in Stock Trading are when you enter a trade.
Warren Buffett is famous for finding companies that have this competitive advantage but he only buys at the right price. He NEVER overpays.
He may spend 6 months and more waiting for the opportune time to buy. And months before that researching the stock.
Finding companies that have an Economic Moat is not a simple or a quick task.
To discover Warren Buffett's secrets to finding these stocks we refer you to the above web page. Why would we simply repeat what is already on the website elsewhere?
Even for Warren Buffett, finding these companies is not easy so don't bother yourself with trying to find them. We've already done a lot of research.
Now, we are not financial advisors, nor do we wish to be. But ... we have listed below the company's here in the UK that we consider have an Economic Moat. We repeat, these are NOT recommendations. Do your own due diligence on these companies.
At the risk of repeating ourselves, here is our list of UK companies that possess a Durable Competitive Advantage.
N.B. These are NOT tips. You must do your own due diligence before commiting yourself.
Here's the list:
Stock Competitive Advantage(s)
Glaxo Smith Kline Patents, high margins
Astra Zeneca Patents,
Rolls Royce Strong brand name
SSE Everday need,
Prudential Brand, customer loyalty
BP Brand, depth of know-how,
BT Group Monopoly
We could go on further. But in the words of Warren Buffett (our "mentor") "you only need to study about twenty stocks over your lifetime."
Once you have identified your stocks, you then need to place them on your watchlist. Look at them every day. Keep abreast of all the news about them. Keep 10% of your pot in cash so you can buy when the time is ripe.
Do not overpay for stocks. Be patient when buying. And be even more patient when holding them.
Be prepared to hold them for months. Even years. Warren Buffett hold his stocks - forever.
It is easy to see why Warren Buffett is one of the richest people on the planet.
He thinks so differently to anyone else.
Why liken a company to a castle with a moat around it? And call it an Economic Moat. A superb analogy. Genius.
We can't possibly become investing genii like Buffett but we can ride on the back of his coat-tails. In his own words, you only need to concentrate on about 20 or so companies throughout your life.
So, once those twenty (or so) companies have been identified, you only ever have to:
That's it. Four options only.
Companies with an Economic Moat are EXACTLY the type of company you should have in your Pension Portfolio.
Some of them will pay dividends, some of them won't. But if they do, re-invest those dividends back into the company stock. It's the best strategy.
Now that's what we call Common Sense Retirement Investing.
Chris and Clem Meet Up - hopefully, the last time before lockdown easing
Chris and Clem Meet Up - at last! They can meet in the beer garden
Chris and Clem Meet Up and it is Chris' turn to do most of the talking. Chris' little windfall has allowed him to widen his portfolio. Chris vows of more.