Determining if the Business Has a Consumer Monopoly

A consumer monopoly is usually evidenced by a brand name product or key service.

Warren Buffett looks for the consumer monopoly to produce earnings that are strong and show an upward trend.

A company that benefits from the high profits that a consumer monopoly produces will usually be conservatively financed. Often it carries no debt at all, which means that it has considerable financial punch to solve problems and to take advantage of new business prospects.

Warren Buffett believes that in order for a company to make shareholders rich over the long run it must earn high rates of return on shareholders' equity.

He also believes that the company must be able to retain its earnings and not have to spend it all on maintaining current operations.