Good businesses with that ‘protective moat’ that Warren Buffett likes have the ability to cope with inflation by raising prices. As he said in 1993:
‘The might of their brand names, the attributes of their products and the strength of their distribution systems gives them an enormous competitive advantage, setting up a protective moat around their economic activities. The average company, in contrast, does battle daily without any means of protection.’
BERKSHIRE HATHAWAY HOLDINGS
Stocks held by Berkshire Hathaway in 2002, as stated by Buffett in his letter to stockholders include:
- The Coca Cola Company
- American Express
- The Gillette Company
- H and R Block Inc
- Moody’s Corporation
- The Washington Post Company
- Wells Fargo and Company
These are all companies with a unique or special product, or with a company brand name, or in a market domination position. They or their products have a loyalty (voluntary or otherwise) that means customers want or must come back.
Another desirable quality in non-commodity companies is repeat business. Customers drink their Coke, wear out their razor blades, or finish reading their Washington Post, and then, eventually have to replace it.
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