Michael Mauboussin on Finding the New Moats Of Investing (Issue #32)
I recently went to a “fireside chat” with Michael Mauboussin who gave valuable insights from his vast knowledge on many subjects (unsurprisingly). However, he did accent one point I wanted to discuss today. Competitive Advantages.
Historically, brands themselves had competitive advantages (moats). For example, Coca-Cola (KO) and The Washington Post had credibility that worked as moats for their businesses. Now those moats have eroded so what are the significant moats today? And how can investors find and think about them? According to Mauboussin, the moats are found in intangible assets. A prime example of this is Google, the company owns the three largest search engines in the world: Google Search, YouTube, and Maps. Google Search in its respective field has 90% market share. If you are interested in a full deep dive on Google go here.
Now back to Mauboussin and Moats, the idea Mauboussin was trying to get at is that tech companies can get massive advantages that aren’t reflected on the balance sheet. However, these advantages can be infinitely valuable. Going back to the Google example just think about the upset of Google Search ceasing to exist (that includes Safari’s ability to work). In addition, these advantages are not regulated under laws that break up monopolies. This lets Google to maintain their 90% market share without any potential of losing ground anytime soon.
Portfolio Updates:
Alphabet/Google is now officially on the list!
Check out the full spreadsheet of companies and their linked deep dives here.
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A little biased but…
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Until Sunday,
Soren
Disclaimer: Soren Peterson and Pillars And Profits Newsletter are not responsible for any investment results. This is not financial advice. Always do your own research.