Stocks with a Durable Competitive Advantage

A mainstay of Warren Buffett’s investment philosophy is his belief that the strongest companies possess a keen competitive edge against their peers. He looks for businesses that perform consistently, regardless of outside forces, boast brand recognition, and/or provide goods and services people use on a daily basis. In an article for The Globe and Mail, Validea CEO John Reese offers four stock picks that score highly based on their competitive strengths.

  • Apple Inc. (AAPL): The tech behemoth earned Buffett’s thumbs up due to its household-name status and highly coveted consumer products. The company’s predictable earnings and impressive return-on-equity of 29% (over the past ten years) contribute to its perfect score under our Buffett model.
  • Nike Inc. (NKE), another iconic brand whose swoosh logo is one of the most recognized in the world, has become nearly synonymous with athletic living. Our Buffett- based model favors its average return-on-equity of 17.8% and 20.7% over the past ten and three years, respectively, as well as the steady growth in this metric over the past five years.
  • Alimentation Couche-Tard Inc. (ATD.B) is one of the largest company-owned convenience store operators in the world, and has generated a 21% return on retained earnings. The company’s steady earnings stream and profitability point to a solid competitive advantage.
  • Ritchie Bros. Auctioneers Inc. (RBA) is the world’s largest auctioneer of industrial equipment. The company recently agreed to acquire IronPlanet, the industrial sector version of eBay for $700 million (U.S.). Our Buffett-based model likes RBA’s free cash flow of $1.60 (Canadian) per share.


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