With all the economic question marks lately, investors are craving some stability. Enter wide-moat stocks. These fortress-like companies have durable competitive edges that act as economic moats, protecting them from competition and enabling juicy returns over the long haul.
Still, as we approach the end of summer 2023, there’s plenty of uncertainty, even around companies with wide moats. But savvy investors take a page from the Oracle of Omaha in times like these. Warren Buffett has made a fortune by betting on high-quality businesses with structural advantages in their fields. By digging into operations and money matters, Buffett spots companies poised to prosper decade after decade, no matter how wonky the markets get in the short run.
Snatching up shares of these winners when they’re undervalued can pay off big time down the road, thanks to the power of compounding. Let’s look at three such wide-moat stocks that stand out.
Apple (AAPL)
Warren Buffett once famously said that if someone offered you $10,000 to never buy an iPhone again, you wouldn’t take it. And unless you live in North Korea, that’s as true as it gets.
In my view, Apple (NASDAQ:AAPL) is the best blue-chip company out there, and its moat is basically indestructible. It’s no wonder most holding companies, including Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), allocate a substantial portion of their portfolio to Apple stock. Even better, after its recent correction of around 11%, the stock looks attractively priced for a long-term position.
Apple just reported earnings that were a mixed bag. Revenue narrowly missed estimates, down 1.4% year-over-year. iPhone sales fell 2% amid supply constraints. This news initially sent the stock lower in after-hours trading. However, I believe these results are nothing for long-term investors to worry about. Apple’s services segment hit a new all-time high, proving the stickiness of its ecosystem even during tough economic times. The company also continues to innovate with exciting new products on the horizon, like the Apple Vision Pro headset.
While Apple faces some short-term headwinds like FX and supply chain issues, its brand remains one of the strongest in the world. With its fortress balance sheet, Apple is poised to thrive for decades to come. I firmly believe this is a dream stock to buy on dips and hold forever. Any weakness presents a golden buying opportunity for those with a long investment horizon. The latest dip is no different.
Moody’s (MCO)
Moody’s (NYSE:MCO) is Warren Buffett’s eighth largest holding, for very good reasons. The credit rating industry is extremely concentrated, with only three big players. Moody’s is the second-largest company in this industry and retains the highest profit margins among the two public companies. Plus, it arguably has the strongest brand value of them all.
Moody’s credit ratings and research are deeply embedded in global financial markets and regulations. Its reputation with issuers and investors has been built up over more than a century. While new technologies will bring changes, I believe Moody’s entrenched position remains very secure. With a reasonable valuation at 32-times forward earnings, this is a high-quality stock perfect for a “buy and hold forever” portfolio.
Moody’s just delivered a strong quarterly earnings beat, with earnings per share of $2.30 versus estimates of $2.22. Revenue also topped forecasts at $1.49 billion. The company raised its guidance for the rest of the year, now projecting roughly 10% revenue growth, reflecting its confidence even in a turbulent market.
If you’re still not convinced, Moody’s has a forward dividend yield of almost 1% to sweeten the deal.
Visa (V)
It’s hard to argue that Visa (NYSE:V), the largest credit card company in the world, is going away anytime soon. This household name has a massive impact on the fintech industry and grows with the broader economy as vast amounts of money flow through its network. Even better, it boasts one of the best profit margins in the entire stock market at over 51%. Visa is slowly gaining more and more market share internationally, and if trends continue, this duopoly with Mastercard (NYSE:MA) could very well turn into a monopoly.
However, some analysts have warned that emerging digital payment rivals could disrupt Visa’s traditional card-based business model. I do not believe this is a serious long-term threat. Visa just posted strong quarterly results, with its earnings per share beating estimates at $2.16 versus $2.12 expected. Revenue also topped forecasts at $8.12 billion. While new payment technologies are emerging, Visa’s acceptance network alone will ensure its dominance for decades to come.
The stock isn’t cheap at nearly 28-times forward earnings, but premium quality rarely is. Visa generates abundant cash flow, has pricing power, and possesses an economic moat few companies can match. For a set-it-and-forget-it investment likely to outperform over the long run, Visa belongs in every investor’s portfolio.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
