In his latest article for Nasdaq.com, Validea CEO John Reese takes a look at the “economic moat” concept made famous by Warren Buffett, and some stocks that currently possess moat-type competitive advantages –something that could be increasingly important if inflation rears its head, as many top strategists believe it will
“History has shown that when it comes to beating inflation, stocks are a better place to be than bonds, or even gold and commodities. David Dreman, one of the strategists upon whom I base my ‘Guru Strategies’, has noted that unlike bonds or bills or gold, stocks can produce increasing earnings streams during inflationary climates, as companies raise prices,” Reese writes. “Certain companies are better positioned than others in terms of pricing power, however, and often such firms have what Warren Buffett famously calls ‘economic moats’ [which] give a company an inherent leg up on its competitors. They can come in a variety of forms: size and economy of scale; brand name recognition; status as the low-cost producer in an industry; status as the elite service provider in an industry; high switching costs for customers.”
Reese looks at five stocks that appear to have economic moats, and also get high marks from his Buffett-inspired Guru Strategy. Among the standouts: Oracle Corporation and Johnson & Johnson. To read the full article, click here.