041 - 7 Types Of Moats That Give Companies Their Competitive Advantage

Ever wonder why some companies keep going up in price and others struggle? It boils down to a few things, one of them being their competitive advantage. 

Once a business has a hit product or service, everyone and their mom tries to copy them. But sometimes others can’t duplicate those wins for various reasons which is what they call a moat. 

Today we cover 7 different kinds of moats to give you an advantage when it comes to picking stocks. 

Stocks that have moats and are undervalued right now.

• MMM
• VZ
• PFE
• MO
• PM
• BTI

Many moat stocks don't pay a dividend because they're growth stocks, but you can invest in them in other ways like YieldMax™ ETFs or DOGG.  

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**DISCLAIMER**
Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

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Transcript

Welcome to Roaming Returns, a podcast about generating a passive income through investing so that you don't have to wait till retirement to live your passions.
Ever wonder why some companies keep going up in price and others struggle? It all boils down to their competitive advantage. Once a business has a hit product or service, everyone and their mom tries to copy them. But sometimes others can't duplicate those wins for various reasons, which is what they call a moat.
Today, we cover seven different kinds of moats to give you an advantage when it comes to picking stocks. Check out the deets. What up? What's good? We back.
Yo, yo. Yeah, well, a winner came back for some effed up reason. It's the full moon, man.
It always gets a cold spell when full moon pops. Super cold. All you do is complain about cold.
Two weeks ago, it was like 70 to 80. It was perfect. And now it is like 10.
Are we really talking about weather right now? Bullshit. OK. If you recall, last week, I said we're going to do we're going to have a two parter coming up.
Today, we're going to talk about economic moats. And the next week will be like the dividend aristocrats and challengers and kings and all those. Because you need to understand what a moat is before you can actually delve into picking a dividend aristocrat, because they all are companies with economic moats.
So I figured it would be better to teach you about moats. It'll make more sense when we're talking about the dividend aristocrats next week. Let's get moaty.
So that was my long winded introduction. I should have said, hey, moat. Moaty, moaty, moaty, moaty.
OK. In my opinion, one of the most important aspects of a business is their ability to fend off competition. Whether that be they make stellar products like Nvidia, for example, they make like stellar products that nobody wants to live without.
Or whether they have embedded advantage like utilities, for example, they all have competitive advantage over their competitors because the government basically says you are going to be a utility for this state. You're going to do the electric. You're going to do the gas.
Oh, is that how that works? Yeah. Yeah. And that makes a lot of sense.
And then you have companies like Apple that come along and they make something. I was going to say that's the one I always think of. That people just can't live without.
And then, you know, we're going to get to all of it. But like I'm saying, the competitive advantage is sometimes internally produced. Sometimes it's geographically produced.
And sometimes it's like regulation produced. But if you have a competitive advantage, that's a huge benefit for dividend paying stocks because that means you can basically charge what you want, increase your dividends every year because you have no competition. So you don't have to worry about like spending money on advertising and crap like that.
OK. That was another long winded introduction. OK.
What is an economic moat? Warren Buffett talks about these all the time. So if you are a Warren Buffett fan or someone from his school of thought, he always brings up moats. Basically, an economic moat is a distinct advantage a business has over competitors, which allows it to protect its market share and long term profitability from competitors.
Competitors. Competitors. I can't say that word.
Competitors. Now, when they're talking about moats, they'll talk about two different kinds. They'll talk about a wide moat, which is kind of self-explanatory.
And they'll talk about a narrow moat, which is kind of against self-explanatory. But a wide moat is one that's very difficult to mimic or duplicate. So it creates a wide barrier against competition, whereas a narrow economic moat is when it's a it's a slight competitive advantage, but it doesn't like overly like deter competitors from trying to duplicate things.
And that's the thing with most companies that have like an advantage. Anybody who's like a competitor in the field will see, hey, they're doing something. It's working.
You see it all the time, even in social media that people copy people. And then as soon as somebody copies you, then you kind of lose like your advantage. So then you have to actually trailblaze again.
And then you're actually doing something right if people keep copying you. But the nice thing is when you have a moat, it's harder and harder and harder for them to actually copy you, follow suit. And that's where we're going to get over the different kinds of moats.
Well, like established companies with economic moats have like a way from competitors from eating away at stuff, because let's face it, like if if I sold something like a pair of shoes for ten dollars and like my neighbor saw that I was making ten dollars for a pair of shoes, they would probably find similar shoes and sell them for like five dollars or six dollars or eight dollars. And that's exactly what China does with a lot of stuff. They go in, they find products, they make the same products and then they like make it cheaper.
So I would have to create a moat. I don't know how to do that. Like with shoes reference, I guess like I would have to make my shoes myself.
So I'm not like actually paying for someone to build the shoes. Or I would have to create contracts with like people that make shoes for like a dollar like Walmart does. Walmart's notorious for that.
Like they can actually underbid everybody else because they buy so much shit. And mass so that they can actually do the whole price advantage thing. And Amazon does it a lot now, too, don't they? And one of the things you have to think about when it comes to Amazon.
Yeah, they're another one. Amazon. Whenever you think about moats is it has to actually be lengthy.
It can't be like a like, for example, a moat that people thought this just popped in my head because we lost money and it was GoPro cameras, action cameras. They said, oh, they have a moat because no one else is making the action camera. And sure, like within like a year or two, Apple had stuff coming out and then Google had stuff coming out.
And then like after like another year or two, like your freaking cell phones just had action cameras on them. So GoPro got do you up? They didn't have a dirt like I didn't have a lengthy duration. So it actually wasn't a moat.
It was just an innovative idea. That makes sense. Yeah.
Then the competition caught up to it and then they actually figured out the technology and then it surged the market with competitors and GoPro run. Yeah, I'm still I still think GoPro is a good company, but they like their stuff is very expensive. I'm not saying it's not good quality, high quality, but they're kind of like dinosaurs at this aspect within the game.
But I think they pulled back a little bit because they didn't they partner with like police forces or something? I forget. Something happened where they got in with the cameras that I think that's what saved their butts. Now, there's a lot of different moats.
We're going to go over a few like the ones I think are the most important. The first one switching costs. Think Apple.
Apple's huge. Apple's absolutely huge. Think Microsoft.
Basically, what it is is when it's so difficult for customers to switch from, say, Apple to Samsung or switch from Microsoft to what the hell is Microsoft competitor? I don't even know that stuff or something. No, that's my Linux. And what is the other one? Oh, my gosh, I'm having a brain fart.
I'm sure you can fill in the gap there because it'll actually cost more from like if you think about like, say, like you run a business to switch from Microsoft to Microsoft competitor. You have to buy the new software and then you have to pay for the training. Everyone their whole life is trained on Microsoft stuff.
So like for them to actually operate on something else, they literally would have to retrain everybody, which is going to cost you more than just paying Microsoft to keep giving you. And that type of technology with bigger businesses and like government type stuff, like once they buy into a specific kind of program, they stick with it because, yes, the change, the cost of change, the cost of retraining, the cost of, you know, the licenses, the whole package deal. The reason I bring Apple into this system is because not because Apple's technology is so much superior to other ones, but because most people have an iPhone and they have the AirPods and they'll have the iPad.
So they'll have like all the accessories that go with their Apple subscription. And so to actually rebuy all those at a like say they can find a cell phone for cheaper to rebuy all those is where the technology actually integrates with the thing. And that's one of my biggest bitches with Apple. Personally, like I hate them because they have like that proprietary thing, which is great from a business standpoint, but from a user individual, it's like it's monopoly monetized, whatever the heck you want to call it. Because like I prefer MP3, I don't, I like it completely open source. I'm a full open source type person because I want to be able to move it between whichever devices I so choose.
And Apple does this whole thing where you can see how like a lot of the companies will purposely make things like square pegs and round hole, round hole type of like switching because they know that like people generally are lazy, so they're not going to actually. Well, and that was another thing I was actually going to bring this up. Cause like right now we're, we're looking to switch over from Verizon and it is like a lot of people don't switch and they'll keep paying those higher costs because it is such a pain in the butt to then port your number and wait for stuff to transfer and be down and out for a couple of days.
And then that's if there's no technological glitches, blah, blah, blah, blah, blah. I'm still going to do it. It's just a matter of like sitting down.
So if you can find companies that have that, you want to bug, especially dividend companies that pay like a healthy return. You actually obviously like, this is probably the number one, the one. Yeah.
That's why Apple and Microsoft are definitely in a good place. It's hard to, I get like, I should preface all of this, but I forgot to do it. Like it's very difficult to find the notes doing research.
So you actually have to have some imagination, some creativity. And if you don't have that, like I don't really, um, they actually have ETFs that are late, literally like a moat ETFs. And you just go in there and you look at their holdings.
Oh, so that's like a sneaky backdoor. Nice, nice. Piggybacking off somebody else's research.
Yeah. Like, like they like, that's classy. They'll have like a, like the Vanguard moat one is like a really good one.
And like, if you go into its holdings, it'll tell you like the top 10 holdings. So you can be like, Oh, that's, that's kick ass. Okay.
The second moat is cost advantage. This moat is when a company can produce and deliver products or services at a lower cost than its competitors. You want Geico, Amazon, Walmart, Costco, all those are like examples of this particular type of moat.
Yeah, they got so much freaking power and bulk. More, more efficient manufacturing process. They have a better procurement process.
And like they're just Geico is like the cheapest insurance because they just have better rate. Like, I don't even know how to break that down. And sure, I honestly don't know that much about the insurance.
But Walmart's a really good example where they just go in and they buy a whole bunch of stuff. They private label a whole bunch. Amazon, like they get kind of dirty, like they'll actually they'll see that people have a moat through their ABA and then they'll just make the product.
FBA. Yeah, that's what they do. Oh, my gosh.
Amazon is so sketchy. Like when we did FBA, that fulfillment by Amazon thing where you'd send in products. And then if you found a really good product and they saw that it was selling, Amazon would actually come in as a competitor.
And then because Amazon runs the FBA platform, they'd actually kind of like shimmy you out and then lower the price and they'd do like the race to the bottom. But then they'd have the full capitalization. So you'd they keep charging you for having your things stored with them, even though they're undercutting.
It's like, oh, my God. So that's what they do. They like are sending out the leaders with the third party sellers.
And then Amazon is like, well, I'm just going to private label this at a way cheaper price than anybody else can get. And Wal-Mart is the same thing. Wal-Mart likes like the difference between Wal-Mart and Costco.
Actually, Wal-Mart like buy individual things, but they'll buy them in like just ridiculous bulk and they'll just ship it to all their different hundred and two hundred thousand different stores around around the world. Whereas Costco, people that manufacture them don't have to break it down into individual things. They'll just take a crate like a skid full of shit.
A skid full of product. But Costco is a really good one. Like of all the ones we've named so far, Apple, Microsoft, Geico, Amazon, Wal-Mart and Costco, Costco is actually like my favorite dividend stock.
But that's that's that one so far. The third mode is network effects. This mode exists when people use a certain product or service.
The more what happens is the more valuable the network becomes. Like so if you have more subscribers, think Facebook, think eBay, Netflix, the more subscribers that actually subscribe to what they have going on, the the the more valuable the network becomes. And then then you can't crack that.
Like it took it took a good I want to say 10 to 12 years, maybe 15 years for other people to start making streaming things that could actually compete with Netflix, Netflix. Yeah, because Netflix was so far ahead of the game. And then they had that brand following because they love the service so much.
So it kind of like became its own. And I haven't seen anything that I mean, they have different social. There's different social media platforms.
Yes, but I don't I haven't seen anything that competes with Facebook. Well, you know, there are other ones out there. It's just the fact that if you get on them because you don't like the censorship that Facebook has, the problem is there's so few users that they kind of don't make sense.
So people kind of stay with Facebook. Like I haven't seen anyone compete with Facebook. Exactly.
So it's very interesting. And they just started paying the dividend this quarter. It's only 50 cents a share.
But like, I think Etsy would actually be on this list, too, to be honest. It probably was because it's very similar to eBay, even though it's it's a different thing. But like they kind of created their own vicious thing by the users.
So that's the network effect. That's when the more people use their stuff, the harder it is for the competition to actually break into their thing. Yeah.
Google, like I don't even know who's the other. Google even have internet competitors. Firefox is that one? I don't know, actually.
But Bing was the one. But oh, my gosh, Bing is trash. Like if you even just try to go in there and search anything, it's like, what the hell kind of algorithm do they have? So what you see from these, though, is people actually probably all try the competitors like Facebook's competition, Netflix's competition, Google's competition.
And they determine, well, their shit sucks. It's not as there's not enough people. There's and it's not as easy to navigate as what I'm used to.
So they just stay. And so like they're like that's like this category is pretty easy to find, actually, if you have like a fourth dimensional thinking. The next one I'm going to cover is brand.
Basically, that's literally like what it sounds like. Customers become attached to their favorite brands. And it's once people find something they like or something that's simple for them or something that they can eat without like having outbreaks, it's like I'm guilty of this, like with certain chips, certain drinks and other things like I don't have a reaction from like.
Well, so brand loyalty, a couple of things on this list are Nike. Nike's obvious. Like everybody has their shoe preference.
Like I personally love New Balance because they fit my foot really, really well. Brooks, Tim, because I got gnarly feet, he's got fascia, plantiitis or whatever the heck it's called. But actually a sidebar is I found really kick ass shoes on T-Map for like less than $10, which is very interesting considering nothing else has been accommodating for his like gnarly frickin.
It looks his feet are shaped like a woman is stuck in high heels, like they are the gnarliest feet I think I've ever seen in my life. The other one that comes up in the brand thing is the Coke versus Pepsi. Coke and Pepsi like that's a Disney.
To me, it'd be like a Ford versus Chevy type of Chevy. But like, yeah, Ford versus GM, Altria versus British Tobacco and Philip Morris. Like people have their specific brand of cigarettes they like.
They have their specific brand of pop. I'm sorry. So does it drink? Actually, it depends where people are located.
I was going to say, I think most people understand what pop is. I have got shit for 20 years because I grew up in Colorado. I came out here and I call it I call pop.
It's pop. And for 20 years, people like it's soda. It's not pop.
What are you talking about? It's a Northeast thing. Like you losers. It is totally pop.
So I'd be interested to actually. It's Disney's competitor. Out of curiosity, like brand loyalty for Disney.
Yeah, like cartoon, like their cartoon, like Cartoon Network. Yeah, it would be like cartoon. It'd be like Nickelodeon.
Oh, OK. OK, that would make sense. So that's brand like it's brand is a huge like like burritos.
Like you got Chipotle versus most people prefer Chipotle. I think there's like kitchen gadgets like Cuisinart and. So this is basically when customers have their preferred brand for the brand for whatever they have going on.
And because humans are loyal, like I don't. They they said they said loyalty. I think it is creatures of habit and ease of procurement.
He's a procurement. It could also be a status thing in some components, I think. Oh, like people how they will like still only drive Mercedes as opposed.
Yeah, yeah. That's what I'm saying. Like that lady, that lady that came from Europe, she's like, I will not drive a Ford.
She's like, screw that. It's like only Mercedes and Aston Martin. This one's another one.
It's another easy one to identify once you actually put your fourth dimensional thinking cap on, because you like look around like, OK, all you really have to do is just drive around like, OK, look at like go through a neighborhood like look at that car. Look at that car. Look at that car.
Look at that lawnmower. Look at that. Like and then you go to the grocery store like, oh, look at that.
Look at that. I mean, sometimes the brands to completely justify like my dad's in the whole landscaping business and like the what is it? The Echo Eco? He has that brand. Is it Echo? Yeah, I guess it is.
The Echo brand is Echo. They they are hands down the better types of equipment than like the other types of mowers and stuff. I think X marks the other one.
And then it's like if you're looking at the chainsaw type stuff, it's the steel brand. They're like hands down better than everything else. Three M's another one that's like, to me, that's justified for the type of stuff that three M does.
Three M will get to three higher quality. We'll get to three M in a hot minute. Like we're definitely more thrifty.
But when it comes to quality, sometimes you just can't beat. It's like buying store brand cream cheese, like store brand cream cheese just cannot match up to Philadelphia. But you can buy store brand like butter and it's just as good as the expensive butter.
But the taste isn't any different. Like to me, I buy like store by store brand cereal because it's literally the the exact same ingredients that are in one. And you know what? When you start understanding how private labeling works, a lot of times it's the exact same cereal or whatever.
It is literally like, well, we just got the shippers just changed. You got a huge bag of quote dino bites, dino bites for like three. It was three dollars for like three pounds of cereal.
But like if you went to the store and you actually had to buy the Kellogg's version, which is Fruity Pebbles, it was like three dollars for like 20 percent. And it's exactly the same. Literally the exact same ingredients and everything.
And again, once you understand how private labeling works, they literally just proposition this the same place that makes the stuff and they just ask to do it bulk cheaper. But it's just literally private labeling. The fifth one is capital intensive.
This one is very narrow. You'll see why capital intensive is basically where it would cost so much to build something that competitors are just naturally discouraged from competing Airbus and Boeing, for example, with airplanes, because it costs like millions of dollars in research and development and then millions of dollars to actually one plane. Yeah.
Crazy, crazy. That's why Boeing has just had a shit year. And they're still like their stock is still pretty high because they're literally one of two.
I would think another one would be like tanks. I was going to say, what else is there? Evie there for a while. But Evie, they work around.
Well, that's the thing. Sometimes in the beginning, stuff is higher cost intensive until they come up with better processes. Like I think, yeah, you're right.
The solar stuff was kind of in that category. The EV was in that category. I assume the whole space stuff is in that category.
But I assume at some point that's going to be dime a dozen type deal. Maybe even planes. Maybe we'll have individual floating hovercrafts at some point.
Defense contractors like, yeah, what the dynamic general that general dynamics would be like a just a capital intensive one because it costs so much in research development. They're the ones that do like the tankers and the production of like. And then I would think ones that build, they build like the huge ships.
Yeah, another one. I actually work with them a lot at work. I don't know who builds the actual ships.
So that's that one. That one's pretty easy to identify as well. Once you think the sixth one is regulatory.
That was one I brought up before for utilities, utilities, for laws and regulations, make it very difficult for anyone to enter the industry. The utilities and railroads are just like the two biggest ones. And utilities, you can actually have multiple utilities because they serve as different sections of America.
But the rules are still the same. Like in Florida, it's knee for electric. No one can come in there to compete.
So it's literally neat. That's where everyone gets their electric in Florida. That's why we always talk about UGI here, because UGI is like the only gas the only gas company.
And now is the only one that has like electric electric. There's other ones trying to get in, but they can't. Like because there's so many regulations in place, it would cost them so much to compete with PPL.
That is just like, well, if somebody big does come in, like I think that's just kind of happened with us. Like Suez used to be our water provider and they got bought out by Viola or something, but they got bought out. It's not like a new company came in and competed.
They like literally just bought them out and said, we're just taking over. Whatever. And then railroads, like, you know, there's only like four railroad companies in America because it's like all the laws and regulations going to that.
And then also I would think capital intensive, too. Like it has to cost a shit ton to build a train. I would think planes would be something similar to all that, too.
So like that's regulatory. Like those ones are, again, super easy to identify. Like once I go through the list and like you think about it, like, oh, OK, I see all this now because you don't you don't really think of it.
And the last one we're going to discuss this one is very it's huge. It's intangible assets. We're talking patents, trademarks, um, basically because they have the patent to like the certain pharmaceutical drug, they can charge whatever the hell they want for as long.
Like, I guess it's like 10 years because there's laws and regulations in place. And then after 10 years or 15 years, it happens a lot where the patent will expire and then they'll actually get them that far. Then the generic generic ones can come in and make the exact same medication.
That's why you'll like you'll have like certain drugs out there. Like you'll be like, I don't know, asthma drugs where it's like two dollars generic and it's like 15 or 20 with your prescription. Well, their patent ran out.
So then the generic company was actually able to create the exact same thing for cheaper. But for that 10 or 15 years, they have a kickass moat in place and trademarks, the same thing. Three.
That's definitely something to be aware of. If something does have that and knowing there's a 10 10 year window, there is a time because I assume that would tank the stock price if competitors like jump, jump in. What generally what they'll do is like they know if they have a drug that's really good, they have a patent for 12 years or whatever remaining.
Then they'll like they'll just put their research and development in another problem like cancer or diabetes or I don't know, fungus or whatever. So they'll stack them or they'll ladder them so that they constantly always have one to try to keep the prices. Pfizer is notorious for that, or they like they always have something that only they can make because they keep staggering there.
That makes a lot of sense from a business standpoint. And three is another one. Like people don't actually know that three M has a lot of patents in place for like the ear protection and like there's the chemicals composition they use for cleaners and sticking agents and adhesives and like three M is freaking awesome.
That's like my favorite. Like of all the companies that we've listed today, that's my favorite one. Like we have stock in it.
Her mom has stock in it. Well, a lot of the big other ones we were talking about. I think they have the YieldMax ETFs that you can get in, but a lot of them don't pay dividends.
And if they don't have the ETFs, then we kind of just don't buy the overpriced giants. Three M's the exception here. We just got into Pfizer.
Pfizer's for retirement because it's undervalued. Three M's greatly undervalued because they have like a lawsuit come up with calm and they contracted like the hearing things for the service fighters or army people, whatever you want to call them. And like there was like people are going deaf.
So they're paying like so like it's like this is a complete contrarian value time to invest in three M because it does yield like 7 percent. It's grown its dividend every year for 60. I want to say 62 or 63 years.
And it's not like some of the other ones like McDonald's, like they'll grow their dividend for 60 some years. But it's like a penny a year, like three. And it's like two.
Sometimes it's two percent. Sometimes it's five. Sometimes it's eight.
But they're always continuing to grow their dividend because of. And with that lawsuit, I mean, that's going to be in the same category as the lead in the wires for Verizon and T-Mobile, AT&T and all that. Like it's it's a blip on the radar for them because they go through the legal stuff.
They have money set aside for all that stuff. They're still a great company. They come back with a vengeance and their stock goes back up after that bad news comes out.
Those contrarian or those bad panic cells are when you get more shares of the stock and then you write it up, make more dividends, reinvest. So what three M is like, I think was something people should have that in their income portfolio from the start. Yeah.
If you can get it, especially now, while it's undervalued, it's ridiculous, undervalued should be going like it should be trading like 150. Are we able to get any of that or are we still just only in my mom's portfolio? It's your mom's and we got it through that that dog one. Oh, that's right.
The dog of the Dow. The double G. But I got her mom into three. I'm at like eighty.
Ninety. What the hell? I get her and I know this. It's on my spreadsheet.
Ninety one fifty. And it's valued at like a damn near 200 dollars a share with it's like a hell. Yeah, everything.
So like that's what I'm saying. Like it right now, it's currently like one oh eight. I just had management change.
People are super happy about that. So like it's going to go up. So like it's still undervalued by like 30, 40, 50 percent, but you can still get into it and it still has a six percent yield.
So if you're hearing this, get into it. Next step, there is three. I'm like, it's like for real.
Like I can't think of a better income producing investment. Yeah. And you know how I feel about Hercules Capital and how I feel about Arbor Realty and how I like this is this is better than those because it has sixty seven or sixty three years.
I forget years of dividend growth. And we'll go over that aristocrat. It's so awesome that next week, because that was actually pretty enlightening.
Once Tim wrote that up and I was reading through it, I was like, oh, that makes a lot of sense. I personally think you should have at the very minimum 40 percent of your portfolio in moat stocks, moat income produced 40. Yeah, because that's that's even within that threshold.
We're pretty close. OK. So my question now would be, do we have any stocks that are moat that aren't on this list that are moated? Moaty, moaty, moaty, moaty, moaty.
I kind of think the tobacco ones, ARLP is a moat because it's cold and I know a lot of companies sell coal. There's only like three or four. I would fall in utilities, right? That regulation, UAN is probably another one.
What do they do? I forget. Is that that one fertilizer? Oh, that's right. That's right.
They do nitrogen fertilizer. Not a lot of places actually make create nitrogen fertilizer. Camping world would be a moat because there's not a lot of people actually.
Yeah, they just want balls to the wall. And that might be one where maybe competition comes in later, but that might actually have that price of entry barrier because the RVs and stuff do cost a pretty penny, especially the fact they're snatching up every dealership. Main Street Capital has a moat.
I think M.O., which is Altria, has a moat. I think NEP, which is NEE's Renewable Energy Utility is a moat. We have a lot of them, actually, because you have to think all these all these yield maxes are moats.
Yep. That's how we get into the ones with a higher pay. PDI is pretty much a moat because they're like the absolute best.
The bond fund bond fund. So like we're probably we're probably Bitcoin. We're probably it's Bitcoin would be another one, wouldn't it? Or not Bitcoin.
Coinbase. Coinbase. You know, I'd be another one.
Probably 60 percent, maybe more. Dang, son. Maybe more.
But I'm saying like you like if you want to have a like the reason I say 40 to 50 is a bare minimum. I mean, I said 40 before, but I met 40 to 50 as a bare minimum is because you have 50 percent or say 60 percent of your portfolio locked up into moat investments. You can then kind of I don't want to say gamble, but you can be less restrictive in what you can invest in.
You can go for the higher yielding stuff. You can balance your portfolio with the the secure stuff. And then the risk assessment.
That's how I did a lot of the risk assessments. I actually got stuff that I knew the dividend would never be cut. It gives you a little bit of like free and the price appreciation is never going to be too dramatic.
So then I had like, yeah, freedom to be like, OK, well, I can take a flyer on this one or I can take a flyer on that one, because if it goes to zero, it doesn't really matter because we have this going on. For sure. For sure.
And the reason why it's just because they all like because like I said before, they they can use the whatever their moat is to their advantage where they can charge what they want, which is in ridiculous levels of high revenue. And once they have high revenue, they have more profit margin and then they can grow the dividend and the dividends safe. And then their P.E. doesn't really like P.E. doesn't really matter in these as much as it does in other stocks, because if it's overvalued, who's the competitor? It doesn't go on when somebody has a moat.
They're typically like an industry leader, right? Or whatever leader, which means they're going to be the higher price point, which means people are going to push them up faster than the competitors. So what I do is I look for ones that are moats, and then I look for ones that are actually undervalued in their P.E. versus their peers. If they're if they're like an industry leader and their P.E. is vastly less than their peers, and I know they're vastly undervalued.
And that usually is coupled with a news thing, right? Or something. Well, that's like that's how we got 3M at Dirt Cheap. 3M is like the absolute the bomb.
And that's how we got Verizon at Dirt Cheap. And that's how we got Black Hills. And that's how we waited.
We waited for the panic news. And then we were like, nom, nom, nom, nom, nom. So as a contrarian investor, that's what you know.
I know you like when everyone's like, oh, my God, run for the hills because this this this and this and this the lead, they'll never fix the lead in the frigging wires when you just pick it up because, you know, it's like, yeah, that doesn't even make sense. But like right now, I would literally wait on everything we've named except for Pfizer, 3M, Verizon and Altria, MO, PM and BTI because tobacco got ass kicked the last couple of years. But I think that's going to turn around soon.
But we have a couple of sneaky suspicions on that, which we're not going to say anything about right now. But I definitely think they're going to go somewhere. I love Altria.
Like my num nums are made from Altria. Yeah, I mean, and that's beyond personal things. I think there's actually going to be a health component popping out here in the next one of those health health trend things that pops up like bone broth and and certain things.
Like you just mark my wordsies. That's another one of my sideline hobbies. So now that you understand what moats are, when I go next week, when I go into the dividend aristocrats and I start naming off like these companies have had X amount of years in dividend growth.
You can see why. Like, oh, because they actually are the only ones selling this. Yeah.
Or all people are so loyal to their brand or it costs so much. So they'll like make it easier to digest the next podcast. But that is moats in a nutshell.
And I love them. Yeah, they're pretty cool. Now I always get confused with moats and margin of safety, but moats make a lot of sense.
And it was funny because like Tim pulled a quote. Can you go up to the quote, the one with the sharks? Because I think this is so friggin funny. I've been playing around with that AI thing.
It's a good business is like a strong castle with a deep moat around it. I want sharks in the moat to keep away those who would encroach on the castle. Warren Buffett said that.
And I threw in like moat with sharks. And I picture the A.I. shadow had like flying sharks in the air. And I was like, that is amazing.
That's perfect. That's perfect. If you got on the email.
Oh, my gosh. But like another example that I could show you, like I said, define them. You can go into the ETFs that are moat specific ETFs, look at their holdings or you literally can just go into Warren Buffett's portfolio and look at what you have any examples of the moat ETFs.
It's Vanguard moat. I don't mean I'm OK. Moat is the actual ETF thing.
It's actually MOAT. Yeah, that's awesome. MOTI, MOTG.
Like if you just type in moat ETFs, it'll bring up a list of them and you can literally just go into the holdings. If you go into the holdings, like it'll just. I'm curious to see what we got here.
Like this one has Wells Fargo, Masco Corporation, the Walt Disney Company, Equifax. And you think about all those. They all make Wells Fargo has to be the big company with like the money aspect.
Masco, I'm not sure what. I don't even know what that is. Disney's another one that's like brand loyalty.
Wide berth, proprietary stuff. Equifax makes sense. OK, and then you look at Moat's holdings.
They have Allegian. Allegian Air, that's a big one. A-L-L-E, Google, TransUnion, which is the other one of like Equifax.
They got Google. They got Charles Schwab, which is like the best ever. Got Bancorp.
That's all you have literally to find companies with moats. Just click in ETFs and then look at their whole holdings. And they'll give you like you can get their top 10 and you can go, OK, that makes sense.
Oh, that makes sense. That makes sense. And then finding ones that pay dividends now, that's where.
Yeah, that's that's where the tricky part comes in. That's a lot of the big the big ones don't or they pay like they don't really. They don't have to appeal like to their shareholders on that front because they're in growth mode.
They're having such a high price appreciation. They have higher returns. So they go in growth mode.
But the nice thing about some of those is, again, those yield max ETFs with like Google, with Facebook, with Apple, Apple, Microsoft. Actually, in the last email I typed, we haven't actually she hasn't edited it yet. But like the actual number eight best buy for the upcoming week was the Max's, because if you do it right, they're awesome.
Like Microsoft, Coinbase and NVIDIA, Amazon, Apple, they're all like trading well above where they were when I when I got into them and they're paying pretty good dividends. So like, yeah, and that's the thing, like even though we're not huge into Apple, which probably is going to trigger a lot of people because most people have Apple products, but we totally invest in the freaking Yelp Max because we like money. We don't really care.
And you got a great business plan. Yelp Max has Tesla, Apple, Amazon, Google, Netflix, Microsoft, JP Morgan, PayPal, Monero. I have no idea what MSTR is.
OARC, NVIDIA, Facebook, Coinbase, are those all moats? Pretty much a lot of them are. Yeah. Exxon Mobil, American AMD, the chip maker, S Square.
What is it? Three, three AI or whatever it's called. The AI one. Yeah.
Like pretty much 90% of their Yelp Max's are moats. So that must be actually their criteria for going after these these guys for their what their criteria is, like why they're beautiful is because they notice that the ones with the high, the high growth, the high options potential are ones that don't have dividends. So they can actually go into all these.
They don't really pay a dividend, which is a great opportunity for us guys to do options, pardon me, do options and then make money. So that's why I like Yelp Max. But if you do it right, it's good.
Like Tesla is the shit one. The rest of them are pretty good. Exxon Mobil's eh, and the AI one's kind of eh right now.
We say that with the Tesla one. I think they're trying to get their stuff reeled in so they're doing a stock. It was a reverse stocks, reverse stocks.
But that's what it is. So for every to see what's going on with that, she had you got five. Did you want to tell them about that one that's doing a 50 to one? 50? What was that? Walmart Chipotle.
I'm sure they've read about it. But like Chipotle is doing 50 to one. It's worth if it has a huge dip between now and when that happens in April.
It's worth picking up. If it doesn't have a huge dip, then wait till after it does a revert or does its stock split where it's like $60 and then pick Chipotle up. That's going to shoot right back up.
If you ever if you ever like ever see a stock split, the research stock splits, anytime they actually do the stock split, it generally doubles within like a year or two. I think we should do an episode on this. Oh, we can.
Like the last one that I remember, well, the Walmart just had one. But I guarantee you that I think we should do an episode on this. But the last one that I got into was Apple.
I got into it for a mom because the Apple did the I think it was the two for one or five for one or whatever it was. And like sure enough, within like three to four months, she was up like 47 percent. And I was like, I'm good.
I'll tap out. I don't like Apple stocks. You don't make money on it.
Other than price appreciation. Was that just one of those experiments you ran? Probably no, because I knew exactly what would happen with Apple stock. If I had money, if I had the capital, I would have done the exact same thing for Walmart.
And if I had money, I would do the same exact thing for Chipotle. Like there's certain companies, you know, when they do a stock split that all you do is hold it for like up to 12 months and you're going to make a ton of money off it. All right.
So is that everything for the moats? That's everything for the moats. Sharks in the water. Next week, flash of the flying sharks.
Next week will be the dividend aristocrat one. There's like seven different categories, things there. And I think that one's pretty informative because you get the year spans and then it'll make more sense.
And I have like I did like the valuation research for it. So I like I know precisely like what they should be worth. I mean, obviously, the totals are going to be off a little bit because it's like a couple of weeks behind the podcast thing.
But you'll see almost up to date like good companies that are undervalued that pay dividends year after year after year and increase their dividend year after year after year. Heck, yeah. All right, guys.
So the takeaway for this episode is to go look up one of those moat ETFs and then start just brainstorming and matching up the different kind of moats we talked about in this episode to get yourself familiar because that'll start getting you into the mindset of like what to look for when you're looking for dividend payers. So. All right, guys, thanks for tuning in.
We will see you in the next episode. Peace.