November 28, 2014
Revealed: How We Uncovered The "World's Greatest Businesses"
By Dave Forest
Warren Buffett has made a career out of honing in on the world's best
Through his holding company, Berkshire Hathaway (NYSE: BRK-A), he's invested
nearly half of his portfolio in four of the world's greatest businesses --
Coca-Cola, Wells Fargo, American Express and IBM.
But have you ever wondered how Buffett decides which company is truly one of
the market's best investments?
The answer is simple -- he looks at companies with what he calls "economic
Since 1986 Warren Buffett has mentioned moats more than 20 times in his
annual shareholder letters. He calls them "essential for sustained success."
As Buffett put it in his 2007 shareholder letter...
"A truly great business must have an enduring 'moat' that protects excellent
returns on invested capital. The dynamics of capitalism guarantee that
competitors will repeatedly assault any business 'castle' that is earning high
returns. Therefore a formidable barrier ... is essential for sustained
As you would expect, Buffett's moat strategy has paid off.
Combined, Berkshire Hathaway's four large-moat companies have returned 139%
over the past decade -- well ahead of the market's 118%.
Now, I know many of you -- perhaps most of you -- have probably already heard
about economic moats at one time or another.
But I'm not here today to tell you what you already know. Instead, I want to
give you a sneak peek at some groundbreaking new research my team and I have
done on this topic.
You see, here at StreetAuthority, we spend more than $1 million a year on research.
This includes access to some of the nation's top analysts, as well as
databases, advanced software and other research tools.
These allow us to run calculations and identify stocks in a way most investors
simply can't replicate.
Using these tools, we filtered through thousands of companies trading on U.S.
exchanges and identified about 100 of the best wide moat companies.
As a group, these stocks have returned an impressive 271% over the past
decade. That's more than double the returns generated by the S&P.
But we didn't stop there. Instead, our research team drilled down even further
in search of an even better-performing group of stocks.
We started by eliminating weaker stocks through a fairly sophisticated metric
called Economic Value Added (EVA).
Most small individual investors have never heard of this, but it's a critical
figure. It's one of the best ways to know if a company is making enough profit
to cover its costs of doing business.
A handful of America's leading companies use it as a performance metric, and
others even tie executive bonuses to it. Even some of the world's most
advanced financial analysts, including top hedge funds and other billionaire
investors, use EVA.
Yet, as important as this metric is, we still wanted to add one more layer to
our research to ensure we found the absolute best-performing wide-moat
So after eliminating companies with the lowest Economic Value Added ratios, we
narrowed our list down even further by filtering out companies with profit
margins of less than 20% -- since high profit margins are a key indicator of a
When all was said and done, our extra research eliminated two-thirds of the
companies from the original list and created a top tier of wide-moat
companies. And when we ran the numbers on these stocks, the difference was
This top tier returned 381% over the past decade -- significantly higher than
typical wide-moat companies.
This elite group of companies has it all -- huge economic moats... high EVA
ratios... and strong profit margins.
That's why I call them the World's Greatest Businesses.
This list of top tier wide moat firms is a great example of the type of
in-depth research we do here at StreetAuthority. In fact, we selected a few of
the companies on this list for our latest research report, "The 10 Stocks To
Own For The Rest Of Your Life."
Now, in fairness to my paid subscribers, I can't show you the entire list
right now. But I can tell you about one of my favorite wide-moat stocks that I
think you can own forever...
It's one of the most dominant companies on the planet. Its stock is owned by
Goldman Sachs and even 29 members of Congress.
Depending on whom you cite, the company controls no less than 65% of its
market... and possibly upwards of 90%.
Charlie Munger -- Warren Buffett's second in command -- has praised the stock
"[The company] has a huge moat. In fact I've probably never seen such a
wide moat. Their moat is filled with sharks."
The company's near-monopoly has helped it build up a cash stockpile of $59
billion -- or $86 PER SHARE. That means it could afford to pay every investor
a dividend of nearly $86 per share and still not skip a beat.
The company's stock has gained 980% since its IPO. But what's really
surprising is that despite its strong performance over the years, shares are
actually cheaper today than when they went public, based on its
That makes now the perfect time to buy shares of this company... and hold them
If you weren't able to attend my recent live presentation of "The
10 Stocks To Own For The Rest Of Your Life" -- where I gave away the name
of this powerful wide-moat company -- don't worry. We hired a crew to capture
the entire talk on video, and now we've made it available exclusively to our
readers at absolutely no cost.
In this video, you'll get all the details of our research on The World's
Greatest Businesses, as well as the names and ticker symbols of several companies
I think you can buy today and hold forever. To start watching my presentation now,
Chief Investment Strategist
Top 10 Stocks