Corner of Berkshire & Fairfax Message Board

General Category => Strategies => Topic started by: Okonomen on January 22, 2020, 10:01:03 AM

Title: Your best wide moat idea today
Post by: Okonomen on January 22, 2020, 10:01:03 AM
Hi,

Was just wondering since most stocks trade at ATH, 2019 was a crazy good year etc. What is currently your best wide-moat idea?

Mine: Fox Corporation
Insulated from the streaming substitution as they focus on live events and is considered a must-have in many TV viewers TV bundles
Founders own 40% of stock and has recently announced a 2 bUSD bb = 10% of stock
Generates +30% ROIC annually
Has low CapEx requirements
Strong brand/franchise in the US which is pivoting to digital avenues
Growing their local TV segment
Low debt
Trading at 10% FCF yield
Has lots of non-core (partly hidden) assets worth close to 10 USD/share combined (tax asset, ROKU stake, Stars GRoup stake, studio lot, cash)
Has huge pricing power towards cable distributors making them capable of growing revenue LSD

Main risks:
Can't grow revenue like this forever. flow TV is slowly declining
founders may do stupid things... e.g. it seems the Murdochs want to some day merge Fox with News Corp
As they focus on live news/sports they don't really create content with ever lasting IP like Disney etc. However, they also have great WC as content creation is also capital intensive and requires WC
Title: Re: Your best wide moat idea today
Post by: FiveSigma on January 22, 2020, 11:29:20 AM
Okonomen, how do you arrive at FCF multiple of 10x?
Title: Re: Your best wide moat idea today
Post by: Okonomen on January 22, 2020, 11:34:42 AM
Okonomen, how do you arrive at FCF multiple of 10x?

Deduct non-core assets and assume close to 2 bUSD fcf. However, I haven't taken into consideration some modest stock price appreciation
Title: Re: Your best wide moat idea today
Post by: ValuePadawan on January 23, 2020, 10:43:54 AM
For the widest moat I'd have to go with Chr Hansen they provide the freeze dried cultures used to make 70% of the world's yogurt and 50% of the world's cheese.

Extremely High switching costs because if you change the culture you change the taste and customers don't want their favourite yogurt to change taste. They also have selectively bred bacteria that make yogurt taste sweeter and creamier with less sugar and fat by transforming lactose into glucose in the fermenting process. [https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6339885/]

Because the bacteria is a small cost in the making of yogurt and the switching costs are high they can increase prices a lot. Also with all the R&D they do on different cultures of bacteria they are able to come up with new products that no one else has like the example I gave before.

In terms of price its not interesting but in terms of moat its huge.
Title: Re: Your best wide moat idea today
Post by: BG2008 on January 23, 2020, 10:54:31 AM
For the widest moat I'd have to go with Chr Hansen they provide the freeze dried cultures used to make 70% of the world's yogurt and 50% of the world's cheese.

Extremely High switching costs because if you change the culture you change the taste and customers don't want their favourite yogurt to change taste. They also have selectively bred bacteria that make yogurt taste sweeter and creamier with less sugar and fat by transforming lactose into glucose in the fermenting process. [https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6339885/]

Because the bacteria is a small cost in the making of yogurt and the switching costs are high they can increase prices a lot. Also with all the R&D they do on different cultures of bacteria they are able to come up with new products that no one else has like the example I gave before.

In terms of price its not interesting but in terms of moat its huge.

Thank you for such insight!!!
Title: Re: Your best wide moat idea today
Post by: Jurgis on January 23, 2020, 11:39:36 AM
FOXA is narrow moat with negative trend according to M*  ;) I would tend to agree.

If you want wide moat value stock, buy BRK.
If you want wide moat growth stock, buy GOOGL.
Title: Re: Your best wide moat idea today
Post by: TheAiGuy on January 23, 2020, 11:51:28 AM
Facebook.  Itís essentially a monopoly and the CEO is crazy young.  Itíll beat the market for the next 30 years.
Title: Re: Your best wide moat idea today
Post by: RadMan24 on January 25, 2020, 12:59:14 PM
Tesla.  ;)
Title: Re: Your best wide moat idea today
Post by: Lakesider on January 25, 2020, 01:46:43 PM
XRO AU. Just world class cloud accounting software from New Zealand aimed at small and medium businesses. Once you use it you are unlikely to change it, its beautiful. Lots of great features, automatic bank feeds and reconciliations,  invoice scanning ect... Their environment allows developers to create apps and sell them to XRO users. Lots of value add on top of the subscription fees.

Have taken over AU and NZ, doing really well in UK too. They are starting to penetrate the US, struggled at first but the subscription growth in the US seems to be accelerating.

Has been a 3x for over the last couple of years. I got uncomfortable with the valuation and sold recently, but i,m having serious FOMO because i know its a great bushiness.
Title: Re: Your best wide moat idea today
Post by: ValuePadawan on March 11, 2020, 12:08:10 PM
Now that the market has taken a hit I'm out hunting for high quality businesses with big moats because some are trading at fair prices for once. I was wondering if anyone has any suggestions of where to look? (other than at airlines which I have already picked through.)
Title: Re: Your best wide moat idea today
Post by: KCLarkin on March 11, 2020, 12:16:30 PM
Now that the market has taken a hit I'm out hunting for high quality businesses with big moats because some are trading at fair prices for once. I was wondering if anyone has any suggestions of where to look? (other than at airlines which I have already picked through.)

Finally starting to see a few good companies get cheap (most of these are narrow moat -- wide moat businesses are still very expensive):
Gildan - death of events is going to kill their printwear business for a few years but this is trading at prices first seen in 2007.
QSR - not sure why this is selling off. People are still going to drink Tim Hortons! Lot's of debt though. And 3G is on a major losing streak.
ULTA
OTEX
BKNG - Cheap, but I think it will get much cheaper
MSM - distributor's FCF is countercyclical
DIS
GOOG - ad revenue is going to get slaughtered due to travel, etc. But large cash hoard...
TRIP - wide moat, bad business. But will not recover for a long time...

I am still raising cash, but starting to get in the buying mood.

Edit: done raising cash. Starting to look for bargains in the carnage.


Title: Re: Your best wide moat idea today
Post by: Jurgis on March 11, 2020, 12:32:16 PM
V, FB, GOOG.

EXPE, BKNG for adventurous.

BRK for conservative.
Title: Re: Your best wide moat idea today
Post by: KCLarkin on March 11, 2020, 12:43:33 PM
One area to look at is companies with very high cash levels and high FCF (potential for capital returns and M&A). Let me know if you see any selling cheap. Google is getting closer but would like to see this closer to $1000.
Title: Re: Your best wide moat idea today
Post by: Schwab711 on March 11, 2020, 12:45:11 PM
One area to look at is companies with very high cash levels and high FCF (potential for capital returns and M&A). Let me know if you see any selling cheap. Google is getting closer but would like to see this closer to $1000.

PKE
Title: Re: Your best wide moat idea today
Post by: rb on March 11, 2020, 01:00:39 PM
Thing is never cheap but SCI is pretty moaty.
Title: Re: Your best wide moat idea today
Post by: jeffsreng on March 11, 2020, 02:32:52 PM
Pier 1 Imports Inc  8)   -- I'm studying this business to increase my competitive moat.
Title: Re: Your best wide moat idea today
Post by: Jurgis on March 11, 2020, 02:43:34 PM
Pier 1 Imports Inc  8)

No sh!7! They are still in business? Must be wide moat!  8)
Title: Re: Your best wide moat idea today
Post by: LC on March 11, 2020, 03:30:27 PM
Look for monopolies/oligopolies:
(Sorry these may not all be "great ideas" i.e. buy them today, but just dumping a bunch)

Visa MA as discussed at length
MSFT certainly
Bloomberg (lol)
Adobe has a pretty decent moat
Verizon/ATT in the wireless service industry; Comcast if you extend to wired
The railroads, UNP as the pure play or Berkshire
Berkshire of course you get top shelf insurance operations
Disney in the entertainment/storytelling genre
Mcdonalds in terms of fast food
The Canadian banks are pretty moaty
Nike I argue has a moat in various functions (one being talent acquisition)
Paychex/ADP are semi-moaty in the payroll processing space. Especially for largeCo's.
Amazon/Walmart have quite the moats
Title: Re: Your best wide moat idea today
Post by: sleepydragon on March 11, 2020, 03:43:43 PM
Mega Banks (wfc, bac, jpm)
Cigarettes (MO, PM)
Defense (GD, RTN)
BRK
Goog
Intel
TSCO
BNKG
Title: Re: Your best wide moat idea today
Post by: Spekulatius on March 11, 2020, 07:40:15 PM
Now that the market has taken a hit I'm out hunting for high quality businesses with big moats because some are trading at fair prices for once. I was wondering if anyone has any suggestions of where to look? (other than at airlines which I have already picked through.)

Finally starting to see a few good companies get cheap (most of these are narrow moat -- wide moat businesses are still very expensive):
Gildan - death of events is going to kill their printwear business for a few years but this is trading at prices first seen in 2007.
QSR - not sure why this is selling off. People are still going to drink Tim Hortons! Lot's of debt though. And 3G is on a major losing streak.
ULTA
OTEX
BKNG - Cheap, but I think it will get much cheaper
MSM - distributor's FCF is countercyclical
DIS
GOOG - ad revenue is going to get slaughtered due to travel, etc. But large cash hoard...
TRIP - wide moat, bad business. But will not recover for a long time...

I am still raising cash, but starting to get in the buying mood.

Edit: done raising cash. Starting to look for bargains in the carnage.

No compounders brothersís portfolio is complete without MA and/or V.

Defense : LMT, to a lesser extent GD ( which I own a little of)

Airbus: commercial aerospace - BA got its wings clipped

AMZN - #1 in , cloud service
MCO, SPGI - Financial plumbing

The combo UTX/RTN looks pretty good too, if P&W ever gets the geared turbofan engine to work well
Title: Re: Your best wide moat idea today
Post by: Uccmal on March 13, 2020, 05:35:42 AM
Facebook.  Itís essentially a monopoly and the CEO is crazy young.  Itíll beat the market for the next 30 years.

Yep.  And 60 B cash.  In 20 yrs we will be bowing to Lord Zuckerberg, the first private sector trillionaire.