Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The Walt Disney Company (DIS), Caterpillar Inc. (CAT), Apple Inc. (AAPL): 3 Simple Steps for Successful Investing

Page 1 of 2

Countless books have been written about what it takes to do well in the stock market. Each investor has his or her own investment style, and aspects like personality, targets, and risk tolerance are important particularities to consider when it comes to developing a successful investment strategy. However, at the end of the day, the most important drivers of long-term investment returns can be summed up in three simple ideas

1. Look for competitive advantages

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage”.

Warren Buffett

Competitive advantages are the tools that a company possesses to keep its competitors at bay and continue delivering value for shareholders in the long-term. There are different sources of competitive advantages: brands, technological superiority, cost advantages, or patents to name a few examples. Investing in companies with strong and sustainable competitive advantages can be the single most important factor for long-term success, at least according to Buffett.

The Walt Disney Company (NYSE:DIS)

Think about The Walt Disney Company (NYSE:DIS) for example, the company benefits from its tremendously valuable intellectual property which sets it apart from the competition. Disney owns brands like ABC, ESPN, and Pixar among others, and it has the rights to profit from an amazing portfolio of fiction characters, from Mickey Mouse and Tinker Bell to Spiderman and Darth Vader.

These may not be tangible assets, but they are real economic value: The Walt Disney Company (NYSE:DIS) monetizes its intellectual property through different venues like movies, shows, amusement parks, cruises, and merchandising among others. No competitor can replicate these assets, and that´s a big differentiating factor which allows the company to generate above average profitability for its shareholders through the ups and downs of the economic cycle.

When a company has strong competitive advantages, it can generate growing sales and earnings over time, and that means that the shares become more valuable with the passage of time. Investing in companies with sustainable competitive advantages means that time is on the side of the investor, and it can be a crucial aspect when it comes to avoiding the most expensive mistakes.

2. Valuation matters

Valuation can be tricky; there is no objective way to tell when a stock is undervalued or overvalued. But as a general rule, we can use valuation ratios to grasp an idea about how cheap or expensive a stock is at current prices, buying high quality for bargain prices can be a powerful tool for superior returns.

Caterpillar Inc. (NYSE:CAT) is a nice example to consider, the company has a rock solid competitive position in the machinery industry due to its brand presence, nationwide dealer network, and reputation for quality. This means that the firm is in a privileged situation to benefit from the long-term recovery in construction spending, which is showing clear signs of a post crisis turnaround, but still has plenty of upside room on the way towards historical averages.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!