5 Moats

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Jonathan Burton's Life SavingsArchives|Email alerts
Aug. 6, 2012, 12:02 a.m. EDT
http://www.marketwatch.com/column/Jonathan%20Burton's%20Life%20Savings?siteid=nwhwk Let Buffett’s ‘moat’ protect your portfolio
Companies that vanquish rivals are stocks in shining armor
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By Jonathan Burton, MarketWatch

Famed investor Warren Buffett favors companies that are “economic castles protected by unbreachable ‘moats.’” SAN FRANCISCO (MarketWatch) — Raise the drawbridge and man the parapets. Some investors are looking to defend their portfolios with help from mutual funds and exchange-traded funds that buy stocks of companies with “wide moats” — meaning barriers to entry that their competitors find extremely difficult to overcome. “Moat” is Warren Buffett’s description of such an advantage. The famed investor has said that he seeks “economic castles protected by unbreachable ‘moats.’” The idea is to buy, when they are reasonably priced, shares of companies that dominate their industries and show clear potential to maintain their superiority over decades. Read more: Warren Buffett's winning ways, 50 years on. Pimco's Gross: Death of equities is imminent

Bill Gross, Pimco co-founder and bond king, says stocks are dead. Steven Russolillo discusses reader reaction to Gross’s statements. Photo: Bloomberg. “A company that has a greater duration of competitive advantage is simply worth more,” said Paul Larson, chief equity strategist at investment researcher Morningstar Inc., which since 2002 has made moat ratings a cornerstone of its stock grading. Wide-moat companies, he added, “should be able to parlay that into higher returns on invested capital.” The five moats

What affords one company a wide moat while others have a narrow moat or none at all? Morningstar describes five...
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