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TIP546: The Holy Grail of Long-Term Value Investing
We Study Billionaires - The Investor’s Podcast Network
How to Invest in a Business With a Durable Competitive Advantage
Investing in a business with a durable competitive advantage is not easy, but it can lead to high and stable returns on capital. The competitive advantage of a business is its ability to generate excess returns, which is a return on investing capital minus the company's cost of capital. A sustainable competitive advantage requires barriers to entry that prevent competitors from eroding those excess returns. Warren Buffett emphasizes the importance of moats as the main pillar of his investing strategy. Great businesses have wide and sustainable moats, an ever-increasing stream of earnings, and high returns on incremental invested capital. These businesses are constantly generating cash.
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