Chaka’s Note: Longtime PBRG friend and Intelligent Income Daily editor Brad Thomas provides his readers with safe and reliable income investments.
Brad likes to invest in companies that have “wide moats.” In other words, he looks for businesses that are built on solid foundations – with protective measures around them from the competition.
In today’s essay, he takes a look at billionaire Warren Buffett’s portfolio and explains how you can get a piece of the action by following in Buffett’s footsteps.
Warren Buffett won big on August 7 – twice over, too.
For starters, his holdings company, Berkshire Hathaway, reported second-quarter profits of nearly $36 billion. That reinforces Berkshire’s status as the third most profitable company in the world.
And secondly, the stock climbed to record highs as a result.
Now, Buffett’s market moves usually make a splash. The multibillionaire – and one of the world’s top 10 richest people – is practically a god in the investing community.
Here at Wide Moat Research, we don’t worship Buffett (or any other expert, including ourselves). But we do recognize and respect his insights and accomplishments. And many of his money-making tactics align with the kinds of investments and strategies we favor.
I can’t tell you you’ll become a billionaire if you continue reading this article. That depends on so many factors.
But I do want to show you today how to get your piece of the Buffett action by following in his footsteps.
Big Castles and Even Wider Moats
Buffett isn’t shy about sharing his business principles – a fact I’m more than willing to capitalize on. His advice might be common sense, but sometimes we “common” investors just need a reminder.
So it helps to have a refresher of the basics.
Take the “wide moat” concept, for example. I’m such a fan, I named my company after it.
The term was first coined by Buffett in 1995. At Berkshire Hathaway’s annual meeting, he said:
We’re trying to find a business with a wide and long-lasting moat around it… protecting a terrific economic castle with an honest lord in charge of the castle.
In other words, he looks for businesses that are built on solid foundations – with protective measures around them from the competition.
These measures can be because they’re the lowest-cost provider of a certain product…
Because they’re in an industry that’s difficult for new businesses to enter…
Or because they’ve done a great job of establishing their brand as “the one” to go to…
That’s why Berkshire Hathaway holds such stocks as:
Amazon.com (AMZN), with its low-cost, one-stop, at-home shopping appeal.
Apple (AAPL), with its double-dip status as the “cool kid” on the block that’s also the best made.
Visa (V), which stands out as one of the world’s most recognized and admired companies. (Remember the “everywhere you want to be” slogan it used to run? That reputation remains today.)
Coca-Cola (KO), the world’s largest non-alcoholic beverage company.
And ruling over those moat-circled castles is always the same king – a leader who’s aligning company success with shareholder interests.
Be Ready to Act When the World Stops
Clearly, I very much agree with Buffett’s “wide moat” premise. His stance on castles, too.
But there’s a third premise he combines to create and keep the long-term winning portfolio that is Berkshire Hathaway…
As he explained to the University of Maryland in November 2013:
Berkshire always has $20 billion or more in cash. It sounds crazy, [like we’d] never need anything like it. But some day in the next 100 years when the world stops again, we will be ready. There will be some incident. It could be tomorrow. At that time, you need cash. Cash at that time is like oxygen.
The last time the world “stopped” before Buffett gave those remarks was the 2008–2009 Financial Crisis.
It wiped out millions of portfolios. But it also created opportunities we would never have gotten under normal conditions.
And sure enough, the inevitable world-stopping scenario happened again… Not 100 years in the future, but less than a decade later when the whole world shut down due to the global COVID-19 pandemic.
So many companies fell apart during those dark days, devastating many regular investors.
But the ones that survived?
They had castles. They had moats.
And they had cash.
Now, I can’t tell you when the next crisis will be. But I can tell you this: The same practices that saved companies and investors the last two times will win out again.
Because they’ll be able to pick up high-quality assets for pennies on the dollar. And when the market corrects itself, they’ll be able to ride them higher to easy riches – just like Buffett has perfected.
That’s why I’ve created a portfolio of the highest-quality stocks in the market. And right now, I see a unique opportunity to profit – and earn income – from some of the best-run businesses on the planet, including one of Buffett’s favorites: Amazon.
By benefiting from volatility-resistant business models, wide moats to fend off competitors, and enough cash on hand to profit in times of crisis… These companies can help you follow the blueprint to reliable wealth.
To join me and learn about the income opportunity with Amazon I’m seeing today, click here.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily