COMPANIES WITH MOAT
The moat concept has been popularized by the legendary investor Warren Buffet. Warren Buffett has argued repeatedly and persuasively for the importance of moats in investing. Many of Buffett’s successes have come from companies with “Wide Moats”.
Companies with moat are essentially companies with sustainable competitive advantage derived from their brand value, possess pristine balance sheets, exhibit superior economics of business with pricing power, demonstrate track record of consistent free cash flow generation with solid returns ratio. These companies are able to translate their advantage into accelerating their profits and moving well ahead of the competition. Some established sources of moat are strong brand, first mover with long operating history, diversified customer base, wide distribution network, IP based business, high switching cost, low cost manufacturing or economics of scale.
We have identified some companies exhibiting moat characteristics with some recent inclusions:
ASIAN PAINTS / BHEL / BHARTI AIRTEL / BLUEDART EXPRESS / BOSCH / CASTROL INDIA / CERA SANITARYWARE / COAL INDIA / COLGATE-PALMOLIVE / CRISIL / CUMMINS INDIA / EXIDE INDUSTRIES / GILLETTE INDIA / HAVELLS / HERO MOTOCORP / HUL / IDFC / ITC / LARSEN AND TOUBRO / LUPIN / MARUTI SUZUKI / MCX INDIA / NESTLE / NMDC / PIDILITE INDUSTRIES / PETRONET LNG / POWER GRID / TATA GLOBAL BEVERAGES / TITAN COMPANY / ZEE ENTERTAINMENT
There is empirical evidence that if a portfolio is built around companies with moat value, accumulated gradually in times of market inefficiencies, it can prove to be a long term “Alpha Returns” generator beating the benchmark index !