Protect your profits – buy firms with deep and wide moats

Firms with strong brands, superior products or that exploit network effects are hard for competitors to keep up with. That means big profits for their investors. Mike Tubbs picks the best protected companies.

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One of Warren Buffett's most memorable expressions is "economic moat", a phrase he coined in 1999. Just as castles are protected from marauding armies by a stretch of water, some companies boast wide protective moats keeping them well away from competitors seeking to encroach on their territory: one or more characteristics give them a sustainable competitive advantage and preclude a decline in profitability.

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Ten companies with wide moats
CompanySectorMain businessMarket cap 17/8/18
AlphabetSoftware & internetDigital advertising$840.6bn
Amazon.comRetailOnline retail$918bn
ASMLTech hardwareLithography (duopoly)€74bn
DiageoBeveragesAlcoholic drinks (spirits & beer)£68.6bn
ElektaHealthRadiotherapy (duopoly with Varian)SEK46.8bn
MedtronicHealthMedical devices$122.5bn
Novo NordiskPharmaDiabetes treatmentsKr758bn
Salesforce.comSoftware (SaaS)SaaS customer relationship management$107.7bn
Visa IncFinanceElectronic payments$324bn
RightmoveInternet property portalProperty sales & rental website£4.5bn
Dr Mike Tubbs

Highly qualified (BSc PhD CPhys FInstP MIoD) expert in R&D management, business improvement and investment analysis, Dr Mike Tubbs worked for decades on the 'inside' of corporate giants such as Xerox, Battelle and Lucas. Working in the research and development departments, he learnt what became the key to his investing; knowledge which gave him a unique perspective on the stock markets.

Dr Tubbs went on to create the R&D Scorecard which was presented annually to the Department of Trade & Industry and the European Commission. It was a guide for European businesses on how to improve prospects using correctly applied research and development. He has been a contributor to MoneyWeek for many years, with a particular focus on R&D-driven growth companies.