7 January 2009
Moats make money
Posted by selfprofit under: Business; Investment; Money; Personal Finance .
TO A MAN, the majority of the world’s successful investors adopt an identifiably clear gameplan. This involves firstly to identify the businesses that can generate above-average profits; then wait until the shares of those companies trade for less than their intrinsic value before buying in. Finally, hold on to these shares long enough until the shares become over-valued or until a better- yielding opportunity comes along. In all, the investments need to be measured in years, not months.
Clients of Morningstar, the Chicago-based investment research company, are not only guided by this tried-and-tested strategy, but have the added benefit of getting a moat built round their investment. Its founder, chairman and chief executive officer Joe Mansueto armed his army of managers and analysts with the idea of building an `economic moat’ in helping individuals invest in mutual funds.
Moats indeed have become the cornerstone of Morningstar’s approach to investing and the basis of its stellar achievements; the company has regularly notched revenues of more than US$ four hundred million over the past twenty three years of its existence with above-average profitability.
This book takes the idea of the economic moat whose creation Mansueto attributes to the Sage of Omaha himself - Warren Buffet - one step further beyond just cementing sustainable advantages that protect a company against competitors.
This book may be pint-sized but by the time you have thumbed through its entire 200 pages, you’d have the skills of a savvy moat builder required to keep your investments sound, safe and thriving.
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