Ben Hobson | Aug 03, 2020 09:51
There's an exclusive group of companies in the stock market that stand out because they've got what billionaire investor Warren Buffett calls economic moats. Like medieval castles, their profits are fortified by impregnable business models... and there are signs that Hargreaves Lansdown (LON:HRGV) (LON:HL.) might be one of them.
Given the present disruption and volatility in the stock market, it is more important than ever to identify high-quality stocks for your portfolio - and finding companies with moats is one way to do it.
Moats come in different forms, but they mostly consist of:
Here's a quick guide to finding the clues to economic moats - using Hargreaves Lansdown (LON:HL.) as an example...
Some of the biggest indicators of a moat involve persistent strong margins and high levels of cash generation – cash being especially important given the recent shocks to the worldwide economy. Here are a few ways of gauging these characteristics - and how Hargreaves Lansdown compares:
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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