Moat Investor

Moat Investor Basic Philosophy

This article is a starting place for understanding the principles used by Moat Investor in the valuation of companies and the timing of investments. It is like a launching pad for examining the entire site. Each area below has a link to more information on the selected topics.

Note: you may want to return to this page from time to time as it is a living document that will evolve with our content, research and further learning.

Moat Investor takes its basic philosophy from Warren Buffet’s style of value investing:

1. Only invest in businesses and industries you can understand
2. Only invest in companies that have a significant competitive advantage (Buffet calls this a “moat” which is from where this site takes its name)
3. Only invest in companies that feature great management
4. Invest only when the price you pay contains a margin of safety
5. Invest only in companies with a high Return on Equity (ROE or ROIC)
6. Invest only in companies with consistently (i.e., minimum of 10 years) strong free cash flow and profitability
7. Invest only if the company has avoided excess debt

It is our belief that while all of these elements are critical for committing your hard-earned cash in an investment, the average investor has the most difficult time evaluating a company’s moat. Moat Investor is committed to educating investors in all of these areas, and especially with regard to competitive moats, as we believe that the investor with a real knack for evaluating competitive differentiation and changing market conditions will have a significant advantage of the average investor or even institutional investors.

To these basic tenants, Moat Investor also subscribes to the following refinements and “tweaks” in the Buffet model:

Phil Town’s Rule #1

• Rule # 1 is “don’t lose money”
• Rule # 2 is “never break rule #1”

Phil has made a major contribution to the area of moat investing including:

• His “Big Five” numbers which consider
• Return on Investment Capital (or Return on Equity)
• Ten-year Equity Growth
• Ten-year Sales Growth
• Ten-year Earnings Growth
• Ten-year Free Cash Flow Growth
• His “Tools” for Investment Timing
• Moving Averages
• The 8-17-9 MACD
• Slow 14-5 Stochastic
• Rule Number One Homework assignments

Jim Collins’ Good to Great:

• Level 5 Management
• BHAG
• The Hedgehog Principal
• The Genius of “And”
• Timekeeping vs. Clock-Making

The Boston Turner Group’s work with growth companies:

• Basics of Enterprise Velocity
• Ideals
• Measurement
• Cadence
• Velocity

Boston Turner Group’s Branding and Strategic Principles in the establishment of a Moat

• Brand differentiation
• Intellectual Property
• Velocity
• Monopoly-like Market Share
• Loyalty
• Extraordinary Value

The tools of the technical traders (sure they’re not Moat Investors, but they’re awesome geeks with awesome tools that measure institutional movement in the market):

• Moving Averages
• MACD
• Stochastic Oscillators
• Candlestick Charts
• Volume