Being able to become an intangible asset of the moat, the first thing you should think of is the brand.
That ’s true, Wood Cove, the former president of Coca-Cola, once said: Even if Coca-Cola ’s production facilities around the world are destroyed by fire overnight, as long as the Coca-Cola brand is there, it can rise again.
In addition to brands, patent rights and administrative licenses are also intangible assets that can be used as moats.
Brand moat
Before investing in Coca-Cola, Buffett only asked himself one question: how much capital is needed to rebuild a brand that is comparable to Coca-Cola?
The final conclusion is that even if the best marketing team on the planet wants to copy the Coke brand, it will not be able to do it for $ 100 billion; and the company ’s market value at that time was about $ 15 billion. A company with a brand value of more than 100 billion US dollars can be bought for 15 billion US dollars, which is indeed a good deal!
So, Buffett began to buy a lot of Coca-Cola shares. From the second half of 1988 to the first half of 1989, Buffett bought more than $ 1 billion in Coca-Cola stocks, and by the end of 2019, its investment return rate was as high as 1200%.
The value of a well-known brand is that it can promote the increase in customer willingness to pay and increase customer loyalty.
It should be noted that well-known brands are not necessarily an economic moat for enterprises. Only those brands that can increase customers’ willingness to purchase or consolidate their dependence on commodities can form an economic moat. After all, the creation and maintenance of a brand requires costs. If the investment cannot generate revenue through pricing rights or repeated purchases, then this brand cannot create a competitive advantage.
So, the next time you see a well-known brand, or a company that claims that its brand has unparalleled value in a particular market, first ask: If their products are priced higher than competing products, are they still popular with customers? If you can’t do it, such a brand will be deserved.
It should be noted that the moat is formed just because of the brand. This is a rare situation-the establishment of most brands also stems from product quality, such as Coca-Cola, “Oreo” biscuits or Mercedes-Benz cars. , And ultimately established a brand based on its unique taste or performance.
Brands can bring long-term competitive advantages, but the most important thing is not the popularity of the brand, but whether it can affect consumer behavior. If consumers are willing to buy just because of the brandBuy or pay a higher price, then this is the most powerful proof of the existence of an economic moat. However, many companies with well-known brands have to struggle to achieve profitability.
Patent moat
For every cell phone sold in the world, as long as the cell phone supports 3G or 4G networks, Qualcomm will charge a patent fee from it. And, this cost is not low-about 5% of the wholesale price of each mobile phone. In other words, for every 1,000 yuan sold, Qualcomm owns 50 yuan.
Do n’t underestimate the 50 dollars. Hundreds of millions of smartphones are sold worldwide every year. An enterprise like Qualcomm that can obtain high revenue by relying on patents is an enterprise with a patent moat.
There is another type of enterprise, whether you live well or not depends entirely on how many patents it has, and that is the pharmaceutical company. For example, under the epidemic, when the media reported that ridxivir may be effective against the new coronavirus, the stock of Gilead Science and Technology, which developed the drug, rose immediately. It can be seen how important patents are to pharmaceutical companies.
Patents are the most valuable source of moats, but there are a few issues to be aware of.
First of all, the patent right has a term. Once it expires, as long as it is profitable, competitors will follow. At this point, almost any large pharmaceutical company has painful skin. The patent for the life-saving medicine “Gleevec” in “I’m Not a God of Medicine” is owned by Swiss Novartis. Before the patent right expires, the price of Gleevec is about 25,000 yuan per box; in April 2013, the protection of the patent rights of Gleevec compounds in China expired, and many domestic pharmaceutical companies began After imitation, the price becomes 2000 yuan / box.
In addition, although the patent right is irrevocable, it can be challenged. The greater the profit brought by the patent right, the more lawyers will try to attack it. For example, many small broad-spectrum pharmaceutical companies will challenge the patent rights at the core of the business of large pharmaceutical companies. Maybe there is only a 1/10 chance of success, but even this little success is enough for them, because the reward is too enticing, not only to make up for the price they paid for it, but also encourage them to continue Challenge it.