Buy stock or entire companies

by


In video below, Warren Buffet outlines the general criteria he uses to buy stock or entire companies:

https://www.youtube.com/watch?v=2MHIcabnjrALinks to an external site.  Warren Buffet speaking to MBA class at U of Florida

Starting at 24:40 of the video, Buffet outlines several principles:

  1. Invest in what you understand
  2. A wonderful business
  3. The business is like a castle with a moat (e.g., low cost at Geico, share of mind at Coca Cola)
  4. A Duke (management team) who is honest and hardworking, who defends the castle
  5. Widen the moat, throw in alligators and sharks (e.g., increase the competitive advantage)
  6. It is a stock where he would be willing to put it in a drawer for 5 years and not look at it (e.g., confidence in a long-term investment)
  7. Don’t pay a totally stupid price

Question:  Imagine that you have inherited $100,000, on the condition that you use the money to buy 1 stock and hold it for 5 years – you can only sell after 5 years to get your money – i.e., analogous to putting 1 stock in the drawer and not looking for 5 years.

  1. What stock would you pick? (Give company name and stock symbol)
  2. What makes it a wonderful business?
  3. What is the “moat” of that company / stock?
  4. What is the company doing to widen the moat?