Focused Compounding Ep 365. Finding Moats: Market Power, Customer Behavior, Substitution, Distribution, and Margin Protection
28 snips
Jul 14, 2022 AI Snips
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Episode notes
Moats and Competition
- High returns on capital attract competition, so recent high returns can be a bad sign.
- A moat is crucial when paying high prices relative to book value or relying on future cash flow projections.
Buffett's Moat Lessons
- Buffett's experiences with American Express, Disney, Dempster Mill, and See's Candies taught him about moats.
- See's Candies significantly outperformed expectations, highlighting the power of strong businesses.
Operator-Based Moats
- In retail and insurance, the operator's skill is often the key differentiator, creating an operational advantage.
- These operational advantages can be hard to sustain if the operator leaves, as seen with Berkshire's retail acquisitions.