Value investment philosophy has always enjoyed a high position in the industry.
Editor’s note: This article is from the micro-channel public number “Su Ning Institute of Finance” (ID: SIF-2015), Author: Fu Yifu, Editor: Chen Xia Ding Yuan.
The concept of value investment has always enjoyed a high position in the industry. Whether it is the “stock god” Buffett or Peter Lynch, or the domestic Duan Yongping and Zhang Lei, these investment tycoons are all value investment without exception. Fans.
Because of this, relying on the concept of value investment, long-term investment, adjusting asset allocation strategies to resist short-term fluctuations, and then using the “compound interest effect” to achieve considerable returns on wealth has become a dream for many investors .
However, in order to obtain long-term stable excess returns, the prerequisite is to choose the right company. This requires us to learn to identify whether a company really has core competitiveness, which is often referred to as a “moat” in the industry. Practice has proven countless times that companies with moats are often very ideal investment targets.
What is the company’s moat? How should we discover it? This is the question that this article is trying to answer.
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I believe that people who have been to the Forbidden City will definitely be impressed by the snake-like river entrenched outside the wall. It is the moat of the ancient Forbidden City-the Jinshui River. Its main function is to defend, not only to prevent Enemy or animal invasion can also play a rescue role in the event of a fire in the city. It can be called a powerful security barrier for the Forbidden City.
A good company also has a similar “moat”.
In a letter to shareholders in 1993, Buffett first proposed the concept of “moat”:
“The global market share of Coke and Gillette razors has actually increased in recent years. Their brand power, their product characteristics, and sales strength have given them a huge competitive advantage. A moat is formed around the economic fortress.”
Two years later, at Berkshire’s annual meeting in 1995, Buffett gave a vivid description of the concept of “moat”:
“Wonderful castle surrounded by a deep and dangerous moat. The owner of the castle is an honest and elegant man. The main source of power of the castle is the brain of the owner’s genius; the moat permanently serves as those who try to attack The obstacle of the enemy of the castle… What we like are those large companies with a controlling position. The franchise of these companies is difficult to be copied, and they have a great or permanent ability to continue operation.”
It is not difficult to find that the moat in Buffett’s words essentially refers to the structural characteristics of a company that can maintain its competitive advantage all year round, and it is a quality that is difficult for other competitors to replicate. Relying on this, companies can effectively defend against competitors