Deeply moated companies

[dlr1493]

I was recently listening to some Berkshire Hathaway shareholder Q&As, and Munger and Buffett were asked which company they think has the strongest moat or brand. Unsurprisingly, Coca-Cola came up. I’ve been thinking about this a lot, and honestly, I can’t think of a brand with a stronger moat. It’s literally ingrained in popular culture — everywhere you look. What makes it so remarkable is that it’s a physical product that engages your senses: you can taste it, smell it, etc. It’s synonymous with positive memories and moments, and it’s enjoyed by people across every income level, all over the world. As a product, it’s fully mature — there’s no real way to improve it, nor is there need (obviously adapt to health trends etc but nothing revolutionary). I genuinely can’t think of a stronger, more enduring brand. 

 

My friend and I were trying to think of other companies with similar characteristics to Coke. Obviously, the usual suspects came up — iPhone/Apple, Google Search, etc. — all very obvious examples. But to my mind, nothing feels quite as strong as Coke for the reasons I mentioned. We were also thinking about other companies or products that have a similar emotional appeal — Disney came up as an interesting example. I’m curious what others think: which companies or products do you see as deeply emotionally resonant for consumers? 

 

In today’s digital world, most products that can truly capture people’s emotions—things you  physically experience—already exist and are deeply embedded in culture. New hits are mostly digital, but they struggle to create that lasting emotional attachment. A phone has to constantly compete; Coke doesn’t. Can anything like Coke ever be created again? Or was that kind of cultural phenomenon a once-in-a-generation thing?

 

At the same time, I know that moats don’t have to be about consumer brands. A company can have a really deep moat for entirely different reasons. Which companies do you consider to have strongest moats and for what reasons? 

[Gregmal]

St Joe. Madison Square Garden. 

 

 

[Malmqky]

Railroads come to mind.

 

YouTube, probably other parts of Google.

 

FICO despite the recent discourse.

 

 

[brobro777]

Credit rating guys like Moody's:

 

 

Even after that the big subprime bust, Buffett said he still gotta pay what Moody's charges even though he would like to pay less:

https://www.youtube.com/watch?v=P88bbG8Du58

 

I think from 2010 to now MCO went off like 25% CAGR vs 14% SPX

 

 

 

[Spekulatius]

Some moats just lose relevancy. The moat is still there but what it was supposed to defend loses relevancy. This happens with booze business.

I think most example for this are in tech. The moat becomes a prison of sorts where management is damned if they break out and damned if they stay in. Examples are Motorola , Cisco, IBM and I think in the future the analog semiconductor business may end up with the same problem.

[Xerxes]

Did someone activated “Deep GFP AI Mode” in this thread 

[LC]

Microsoft has built the strongest moat at least in modern history.

[DooDiligence]

Waste Management

[Marco Van Basten]

45 minutes ago, LC said:

Microsoft has built the strongest moat at least in modern history.

Why do you think so?  Thank you.

[brobro777]

Olympus has maintained dominance (70%) in the global endoscope market for years (https://en.wikipedia.org/wiki/Olympus_Corporation). I read about them years ago when they had that gigantic accounting scandal and the stock puked out to 200 or 300 Yen

 

I think Japan and Europe have these high value specialized manufacturers that dominate their niche and the dominance endures because the customers trust the established dominant player and it would be too costly for a new company to enter and compete

[Hektor]

• HII and BWXT
• DVA
• FAST and GWW

[Hektor]

I would think some of the insurance brokers (discussed in the separate thread) also have moats. Also, CMCSA (cable business) and CHTR.

[Gregmal]

9 minutes ago, Hektor said:

Also, CMCSA (cable business) and CHTR.

How? They have no pricing power and continue to lose customers. 

[tnathan]

Vulcan Materials and the other aggregates producers

[LC]

4 hours ago, Marco Van Basten said:

Why do you think so?  Thank you.

Almost impossible to do business in the world without giving Microsoft money, one way or the other. Maybe the definition of capital light, particularly in their heyday. They functioned as a tax on volume and productivity growth, globally, for decades. A product/service that has probably been complained about more than any other, yet is totally ubiquitous. How much money would you need to spend to dethrone them? I don’t think it’s possible. 
 

Google might be the 2nd, I suppose. Looking forward they have a good shot, given they control (I think) the most data globally. 

[hardcorevalue]

9 hours ago, dlr1493 said:

I was recently listening to some Berkshire Hathaway shareholder Q&As, and Munger and Buffett were asked which company they think has the strongest moat or brand. Unsurprisingly, Coca-Cola came up. I’ve been thinking about this a lot, and honestly, I can’t think of a brand with a stronger moat. It’s literally ingrained in popular culture — everywhere you look. What makes it so remarkable is that it’s a physical product that engages your senses: you can taste it, smell it, etc. It’s synonymous with positive memories and moments, and it’s enjoyed by people across every income level, all over the world. As a product, it’s fully mature — there’s no real way to improve it, nor is there need (obviously adapt to health trends etc but nothing revolutionary). I genuinely can’t think of a stronger, more enduring brand. 

 

My friend and I were trying to think of other companies with similar characteristics to Coke. Obviously, the usual suspects came up — iPhone/Apple, Google Search, etc. — all very obvious examples. But to my mind, nothing feels quite as strong as Coke for the reasons I mentioned. We were also thinking about other companies or products that have a similar emotional appeal — Disney came up as an interesting example. I’m curious what others think: which companies or products do you see as deeply emotionally resonant for consumers? 

 

In today’s digital world, most products that can truly capture people’s emotions—things you  physically experience—already exist and are deeply embedded in culture. New hits are mostly digital, but they struggle to create that lasting emotional attachment. A phone has to constantly compete; Coke doesn’t. Can anything like Coke ever be created again? Or was that kind of cultural phenomenon a once-in-a-generation thing?

 

At the same time, I know that moats don’t have to be about consumer brands. A company can have a really deep moat for entirely different reasons. Which companies do you consider to have strongest moats and for what reasons? 

 

Well there's a moat and there's also growth of that castle with in that moat. Coke has obviously had some challenges on that friend and GLP-1s aren't going to any favours. But health concerns aside, Coke obviously has a  massive moat. I know a guy that has diabetes and still drinks it. 

I'd argue your other examples like Apple are far more valuable and wider. I think most iPhone users would rather switch from Coke to Pepsi or whatever than never use the apple ecosystem again. 

Interesting thought discussion! 

Edited January 12 by hardcorevalue

[dwy000]

1 hour ago, Gregmal said:

How? They have no pricing power and continue to lose customers. 

Half of these companies dont have pricing power despite the "moat".  Coke doesnt.  Costco doesnt. 

 

Comcast, Charter, the aggregate companies, the real estate companies, MSG, all have moats because of geography not because of a differentiated product. 

[Gregmal]

36 minutes ago, dwy000 said:

Half of these companies dont have pricing power despite the "moat".  Coke doesnt.  Costco doesnt. 

 

Comcast, Charter, the aggregate companies, the real estate companies, MSG, all have moats because of geography not because of a differentiated product. 

Theres a reason the Rockettes are the Rockettes or that companies are handing MSG money to be the official peanut butter spread or prediction markets partner of the New York Knicks. Meanwhile Charter can’t raise prices without losing another 10% of the customer base.

 

Geography is important but if it doesn’t come with pricing power then what’s the point? 

[dwy000]

30 minutes ago, Gregmal said:

Theres a reason the Rockettes are the Rockettes or that companies are handing MSG money to be the official peanut butter spread or prediction markets partner of the New York Knicks. Meanwhile Charter can’t raise prices without losing another 10% of the customer base.

 

Geography is important but if it doesn’t come with pricing power then what’s the point? 

If you consider a moat to be pricing power then thats a very different thing than most of the companies listed here.  Aggregates dont have pricing power. Coke doesnt have pricing power.  Costco doesnt have pricing power.  Real estate companies dont have pricing power.

 

Disney and Comcast have incredible moats on their parks.  Prices go up every year and the parks are still packed.  Vegas as a city has a moat, but over exploited their pricing power. 

[Gregmal]

4 minutes ago, dwy000 said:

If you consider a moat to be pricing power then thats a very different thing than most of the companies listed here.  Aggregates dont have pricing power. Coke doesnt have pricing power.  Costco doesnt have pricing power.  Real estate companies dont have pricing power.

 

Disney and Comcast have incredible moats on their parks.  Prices go up every year and the parks are still packed.  Vegas as a city has a moat, but over exploited their pricing power. 

Yea I guess it’s vague in a generalized way, but the way I always interpreted an investing moat, was that it represented power. So both a barrier around the business, but also that barrier allows you leverage with your product.
 

You can own a minor league baseball team in upstate New York and it’s not the same as owning the Yankees. You can’t really replicate the minor league team, but you can’t raise prices to wherever you want. You can with the Yankees. You can own half of Arkansas and it’s not the same as owning all the hotels on 30a. At least from a business standpoint and one of what makes something attractive. 
 

To me it seems the cable companies are all competing for something no one wants anymore.

[dwy000]

8 minutes ago, Gregmal said:

Yea I guess it’s vague in a generalized way, but the way I always interpreted an investing moat, was that it represented power. So both a barrier around the business, but also that barrier allows you leverage with your product.
 

You can own a minor league baseball team in upstate New York and it’s not the same as owning the Yankees. You can’t really replicate the minor league team, but you can’t raise prices to wherever you want. You can with the Yankees. You can own half of Arkansas and it’s not the same as owning all the hotels on 30a. At least from a business standpoint and one of what makes something attractive. 
 

To me it seems the cable companies are all competing for something no one wants anymore.

Not sure id consider broadband something that no one seems to want but I agree on the value of sports teams (although all that pricing power goes directly to the players not the owners).

[tnathan]

21 minutes ago, dwy000 said:

If you consider a moat to be pricing power then thats a very different thing than most of the companies listed here.  Aggregates dont have pricing power. Coke doesnt have pricing power.  Costco doesnt have pricing power.  Real estate companies dont have pricing power.

 

Disney and Comcast have incredible moats on their parks.  Prices go up every year and the parks are still packed.  Vegas as a city has a moat, but over exploited their pricing power. 

Aggregates have some of the best pricing power of any company in the world....I think vulcan has increased prices like 6-8% on average over a decade?

[dwy000]

1 minute ago, tnathan said:

Aggregates have some of the best pricing power of any company in the world....I think vulcan has increased prices like 6-8% on average over a decade?

That was my point on geography not the product.  You can increase prices right up to the delivered cost from the next closest aggregate mine. The product itself is a commodity.   Charter can increase prices in the 30%+ of their geography where they are the only option for gig speed broadband. But they cant where there's competitors. 

[Gregmal]

I would also gander Costco can raise its membership fee pretty much however much it wants to, for quite awhile. 

[dwy000]

6 minutes ago, Gregmal said:

I would also gander Costco can raise its membership fee pretty much however much it wants to, for quite awhile. 

Well thats kind of the question.  Yes they probably could and they could also raise the price on the $1.50 hot dogs and $4.99 chicken. But they dont.  Because the minute they do they start to undermine their reputation for putting the customer ahead of maximizing profit.  Its exactly the same question as to whether its truly a moat if you cant raise prices. 

Edited January 12 by dwy000