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Fixed Asset and Inventory

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Finding Great Companied to Invest In

Warren Buffet, Chairman of Berkshire Hathaway says, “It is best to invest in great companies at a fair price than a fair company at a great price.” That’s a pinnacle statement about Buffet’s investment style. So, to invest like Buffet, you need to know what features denote a great company.
Please read and reread the following carefully.
A great company has a competitive advantage. It has a consumer monopoly, and like a great fortress, has a moat preventing others from capitalizing on it. A competitive advantage is created by producing a unique product or service over a long period of time and being perceived as the leader in the field. Buffett refers to this as a “durable competitive advantage.”
Many of these great companies have been around for a hundred or more years. Coca Cola, one of his favorites, exemplifies this concept, as do several others. American Express and Wells Fargo have also been around for a century. (Interesting, the latter two were founded by the same people.)
So, on the flip side, let’s look at the stocks Buffett avoids. He really hates companies that are involved in something that is price sensitive. Automobile manufactures are a prime example. Most people don’t care if they have a Ford, GM, or Chrysler. They want a great deal, instead.
Because these companies must constantly fight to get a customer, they must constantly upgrade and improve their product by investing lots of money in new automobiles and their development. They are “commodities”, not bastions.
Let’s look at an example taken from Mary buffets book, The New Buffettology. Company A makes improvements in its manufacturing process that lowers its cost of production while increasing its profit margins. Companies B, C, and D lower their prices to compete with company A. And so company A must again adjust. It’s a vicious cycle.
There is a…...

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