Thursday 31 January 2019

How to find assets with protecting walls?

How to find assets with protecting walls (or economic moats )?

When an asset is able to bring positive cash flow, it is an asset; otherwise, it is a liability. Therefore, to ensure you always have positive cash flow, you need to ensure your assets are safe. Some assets have protecting walls (or economic moats). Different assets, the walls may be different.  Prior to purchasing an asset, you should ensure walls are strong enough. And the walls will become more and more solid. Some examples are shown below.

1) Monopolistic business. For examples: water suppliers, electricity suppliers, internet providers, etc. But, you should be caution the result caused by some unpredictable events such as the trouble of some business during "2018 California wildfires".

2)Unique business. For example: Coca Cola

3)System business. For examples: McDonald's, Senior health care center

4) Local short-term irreplaceable business. For examples: local universities, local hospitals.

Can you find other protecting walls?

Keep in mind, only asset with protecting walls (or economic moats) has the capability to create positive cash flow continuously.

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