Locator: 50798THEMOAT.
Related, for the next generation and the generation after that:
- personal investing: how to invest in a "trillion-dollar-market-cap economy; and,
- financial independence.
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The Importance Of The "Moat"
Query:
Investing. Personal. Going through my notes, I look at the various periods of my investing life.
One of the big investing lessons I learned about was "moats." Perhaps I learned this from Warren Buffett. I don't know.
When investing, it seems when deciding in what to invest when it comes to equities, there are three "things" that take precedent over all else.
Core competencies: one must be able to articulate a company's core competencies. One must understand "what business the business" is in.
Moats: secondly, one must be able to articulate a company's moat.
Lasting; thirdly, one must ask whether the company is championing an endeavor that will be around for 30 years.
When looking at investment opportunities, #1 and #3 probably don't change much over time, but moats probably do.
The first of the three: core competencies. Core competencies alone don't guarantee a successful company for the long term. No matter how good at what they did, horse-drawn wagon makers were not a good investment (at least for the long term).
But moats are interesting. Right now, in the fourth industrial revolution, I would argue that one of the greatest moats is the "money moat."
That's perhaps why the dot-com bubble (2000) collapsed: the hundreds of companies one could invest in -- few had much money. Companies were being valued on "eyeballs / clicks" and not on earnings, cash flow, access to quick cash to make deals.
I would argue that when one is looking for which companies to invest in, the amount of cash on hand, or free cash flow, or something related to cash is incredibly important and the "money moat" is incredibly important to consider. Thoughts?
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