Ben Hobson | Jun 05, 2020 11:18
Warren Buffett makes it look so easy: find high-quality companies, wait for a fair price to buy, and then hold them... forever. The problem of course is that these stocks are hard to find - but there are signs that London Stock Exchange Group PLC (LON:LSE) could be one of them.
Given uncertainty in the stock market caused by Coronavirus, it is more important than ever to find high quality stocks. That means buying safe, profitable companies with strong balance sheets. They're the kind of stocks that have the ability to resist competitive threats and generate breathtaking profits year after year. To do that, they need what Buffett describes as "an economic moat".
Defensive economic moats let companies compound returns at above-average rates over long periods. Here's a rundown on what makes these stocks so special - using London Stock Exchange, which is active in the Investment Banking & Investment Services industry, as an example.
There are several ways that businesses can make themselves very hard to compete with, including:
When it comes to finding companies with moats, some of the biggest clues actually lie in their financial statements. Here's what they are and why they are important - and how London Stock Exchange stacks up against them:
Disclaimer: These articles are provided for information purposes only. The content is not intended to be a personal recommendation. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. The author has no position in the stocks mentioned, unless otherwise stated.
Written By: Ben Hobson
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