Moats Part One

Value-oriented Equity Investment Ideas for Sophisticated Investors

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MOI Members Share Their Insights on Moats We invited our members to share their thoughts on identifying companies with sustainable competitive advantage. We present selected responses below.

If we had to summarize the collective wisdom in just a few words, we might echo Bryan Lawrence of Oakcliff Capital: look for high ROIC! We would also highlight Michael van Biemas recommendation of Bruce Greenwalds Competition Demystified as the best book on the subject of moats.

BRIAN BARES, BARES CAPITAL MANAGEMENT The word moat is really a metaphor for competitive advantage. Our research process attempts to parse this concept into more fundamental elements. We undertake a Porters Five Forces analysis of each company that we consider for our portfolio, along with other analyses of unique factors like intellectual property, trade secrets, network effects, standardization, and customer lock-in. We are really looking for any descriptive elements that reinforce a companys ability to outearn its cost of capital over extended periods.

We take an unusual approach to finding wide-moat companies. Most managers in the small-cap space use computer screening to assist in narrowing their investment universe to a size that is more manageable. They will often focus on factors that are evidence of a strong competitive position, like multi-year returns on capital that are abnormally high. The problem with this approach, in our opinion, is that once the evidence of a wide moat is published in the companys financial statements, it is also likely that it is incorporated into its market price. We want to search for competitive advantages that arent yet fully actualized in quarterly or annual accounting statements. This takes a lot of hard work. It involves being on airplanes and in rental cars and doing the laborious fieldwork of investment idea generation. Our analysts meet with as many companies as they can in an attempt to isolate the rare situation where a moat is appearing or widening. By structuring our search in this manner, we hope to build a moat around Bares Capital. It is difficult for other managers to replicate the qualitative work in the small cap space that we have accumulated over the last twelve years.

A good example of a successful investment of ours was a company called Stratasys (SSYS). It had qualitative strengths that had not yet translated into financial results when we found it. The company is the market leader in 3D printers for prototyping and rapid manufacturing. The machines they sell are themselves profitable, but SSYS pioneered the concept of a high-margin consumable revenue stream for 3D printing (think inkjet cartridges for 2D printers). SSYS came from a distant #2 position to industry pioneer 3D Systems a decade ago to their position of dominance today. They did it by painstakingly building a distribution network of small resellers with whom they shared a portion of their consumable revenue. This model locked in the best sales agents early and at a time when 3D Systems was stuck selling into an antiquated service bureau channel. As ASPs for printers dropped, customers could afford the machines directly and no longer needed the service bureaus. By the time 3D Systems could sell directly to customers, SSYS had already locked in the best distribution. This was something we recognized as a moat (and one that was widening), and we knew that the potential for outsized future returns on capital

We are really looking for any descriptive elements that reinforce a companys ability to outearn its cost of capital

over extended periods.



was high. Simple small-cap screens were not able to produce this type of information or understanding. We had to do the hard work on the qualitative aspects of the business ourselves.

ETHAN BERG, PRIVATE INVESTOR What constitutes a wide-moat business? There is the definition I learned by listening to The Grateful Dead and the definition I learned working with Michael Porter and the firm he co-founded, Monitor Company. Fortunately, the two definitions are remarkably similar.

For many years, The Grateful Dead was one of the most popular and highest grossing touring bands in the United States. This is not bad for a group whose lead guitarist was missing 2/3rds of his middle finger. Two quotes about The Dead crystallize what is important about moats. Jerry Garcias made the observation that Our audience is like people who like licorice. Not everybody likes licorice, but people who like licorice really like licorice. He understood that they were not going to appeal to everyone, but the fans they did have they were incredibly passionate. Bill Graham commented, The Grateful Dead arent the best at what they do; they are the only ones that do what they do. They had a distinct sound, a distinct approach to selling tickets, a distinct approach to taping and simply a different ethos. Unless you can point to something distinctive about a company that provides customers a specific benefit, you should be reluctant to say it has a moat. Together, those two vignettes capture the essence of what we hoped to achieve in each of the projects I did during the seven years of Porter/Monitor strategy work.

So how did we think about how a company wins? Porter wrote about it in his HBR article, What is Strategy? Companies win by either delivering a comparable product at a lower cost or delivering more benefit at any given cost, or both. A company outperforms rivals only if it establishes a meaningful difference it can preserve, a durable advantage. They are not simply the best in terms of operational excellence they are actually different. To repeat, wide moat businesses deliver greater benefit to customers at any given cost or comparable value at a lower cost, or both. There need to be differences in the web of activities that the company engages in to be able to do that. A wide-moat company exists when, for a given set of customers and needs, a company has a unique, tailored set of reinforcing activities and/or assets that uniquely deliver value for that given set of customers.

Our goal for clients was to identify, reinforce, or create moats. To do that we would assess: 1) what are the possible customer segments and which ones are attractive 2) what are the criteria by which the attractive segments purchase and 3) to win on those criteria, how do we configure our assets and activities. Analytically, there was a quantitative piece that was derived from intensive survey work. There would also be a fascinating qualitative piece that resembled cultural anthropology, which I studied as an undergraduate. The outcome was typically a message to a CEO You can win, here is how you can win in these areasbut you cant win everywhere. For CEOs, the decision to not try to win everywhere could be a challenge. The decision about which segments to NOT pursue, which growth to NOT pursue, and which activities to NOT do often proved difficult. When Wall Street is calling for perpetual 15% growth, it is

A company outperforms rivals only if it establishes a meaningful difference it can

preserve, a durable advantage. They are not

simply the best in terms of operational excellence they are actually different. To

repeat, wide moat businesses deliver greater benefit to

customers at any given cost or comparable value at a

lower cost, or both.



tough for a management team to say no we wont do this. You see companies succumbing to this imperative all the time. I can tell you that defining moats is a lot easier than defending or creating them.

How do you look for companies with sustainable competitive advantage?

Porters Competitive Advantage, in 592 scintillating pages, does a pretty extensive job thoroughly cataloguing most of the variants of competitive advantage. Ultimately, it comes down to pattern recognition, having archetypes in mind and identifying them when you come across them. Low cost structures, unusual brands, high customer switching costs, network effects, patents, regulatory licenses, unique assets, and natural oligopolies always stand out.

Where to find ideas? On the one hand, very few companies have moats. On the other hand, they are all around us. Watching my then four-year old son and his friends obsess over Spider Man and other superheroes led me to evaluate Marvel comics. Being a Celtics season ticket holder and following the NBA led to Madison Square Garden (NYSE: MSG). You identify the companies with a unique hold on customers and then wait for the price to be attractive. The Wall Street Journal, IBD, regional newspapers, HBR, McKinsey Quarterly and other strategy journals, business magazines, industry journals, and annual reports are good idea starters.

Whenever I see detailed company cost data with data for companies across industries it is intriguing, especially if you can figure out the activities/assets that lead one company to have a lower cost structure than the others. Cents per airline mile flown always provided a good indicator of who was guaranteed to keep losing money. Finding high-quality data on lower cost structures that you can tie to a structural advantage is rare, but exciting. To really flesh out the network of activities that go into having a genuine moat, business and founder biographies and histories are an excellent source. I have a collection of index cards that have scribbled on them old favorites, companies that in one form or another have a durable advantage. When they get cheap enough on the traditional valuation metrics, I look at them more closely. When talking with a CEO or even a salesman, ask Who in your industry scares you the most. Success leaves clues. You can often reverse engineer who has the advantage.

For a short cut to get a quick list of advantaged companies, run a ten-year screen on Captial IQ or similar database for companies with high ROEs each and every year. With this list, you then ask yourself How come? Can you identify activities or assets that help explain this persistent profitability? If so, youve got another possible company with a durable advantage. Then you just need to be patient to buy it right.

An experience investing in a wide-moat business or a supposedly wide-moat business that turned out to be rather ordinary.

I invested in a beautiful piece of real estate. The property is gorgeous. It is clearly advantaged in what they say are the three most important things in real estate: location, location, location. Unfortunately, there were zoning and building code quirks that made the location advantage irrelevant or at least held it in abeyance. Lesson learned. Understand that one significant advantage, even if its the most important thing, does not by itself constitute a moat. Consider the related set of activities and assets.

Cents per airline mile flown always provided a good

indicator of who was guaranteed to keep losing

money. Finding high-quality data on lower cost structures

that you can tie to a structural advantage is rare,

but exciting.



This lesson came up this month in reviewing Gabriel Resources (Toronto: GBU). If their technical reports are accurate, there is no question the asset, if developed, will become the largest gold mine in Europe. And quite profitable, as they will have cash costs in the lowest quartile. Coupled with a dramatic recent price fall due to delays, there may be an opportunity there. The logic presented by the company for moving forward is compelling. The mine is already an environmental mess from 2000 years of mining. If they are allowed to go forward, they will clean it up. Unemployment in Rosia Montana area is approaching 65%. If they go forward, Gabriel will provide thousands of jobs. Seth Klarman has a position. As the market value gets closer to the cash they still have in the bank, it gets more intriguing. For a variety of reasons, it would be great to be able to get comfortable enough to buy it. The hitch is that the local permitting and politics make the mining asset worthless until they are resolved. Even if ones analysis suggests that the mine is productive enough relative to the current price that only a 10% probability of success would still result in satisfactory expected returns, how does one get to the 10%? There are the known complexities: publically known players and competing interests, national politicians, historic Hungarian churches, local politicians, environmental challenges, environmental groups, NGOs, even a few celebrities. Beyond the known complexity, there is no doubt an arcane, local process that is filled with colorful personalities, long histories and idle bureaucrats. There are also few parcels of land they need to secure. Without the ability to handicap those intensely local issues, how do you get from a 2% probability, to 5% or 10% ? And when you recognize that the permits are a pre-requisite to any value being created, it is sobering. So in this case, we can refer to a low-cost asset estimated to have 8 million ounces of gold as a supposedly wide-moat business. Wide moat businesses are hard to find! Even a low cost source of 8 million ounces of gold may not be enough!

BRIAN BOYLE, BOYLE CAPITAL There are generally four things we focus on when looking for companies with a wide moat:

Financial Performance and Strength Does the business earn above-average returns on capital? Does it generate excess free cash flow? Lastly, does it employ moderate to low debt levels?

Business Track Record How long has the business been able to generate and sustain its financial performance?

Business Outlook and Opportunities Where is the business going? What does the landscape look like over the next 5 years?

Management What is managements track record of deploying the excess capital? What is their ownership stake in the company?

An example today would be a company like the CME Group (Nasdaq: CME). Its a leading derivatives exchange that trades futures contracts and options on futures, interest rates, stock indexes, foreign exchange and commodities. CME benefits from a network effect because they have the deepest pool of liquidity and clients who trade on CME have capital efficiencies since the company clears its own products and allows for product off-sets. The companys market share in

If their technical reports are accurate, there is no question

the asset [Gabriel Resources], if developed, will become the largest gold mine

in Europe.



U.S. Treasuries, for instance, is 98%. In addition, volume on interest rate futures represent approximately 20% of revenues and should benefit from increased volatility in interest rates in the years ahead. CME is also likely to benefit from Dodd-Frank regulatory requirements that require OTC swaps to be cleared on an exchange versus in-house broker dealers. At 16x 2012 estimated earnings and a dividend yield over 3%, we find the shares attractively priced.

GRAHAM CUNNINGHAM, PRIVATE INVESTOR I dont think I could ever write anything as clear as Chapter 4 in Competition Demystified by Bruce Greenwald. Basically, many years of stable market share and returns on capital significantly above the cost of capital are the two things to look for. The only companies I am invested in with these characteristics are American Express (AXP), which I bought in May 2009, and Wal-Mart (WMT), which I bought when it dipped below $50 per share last summer. I was invested in Fanuc (FANUY) for a couple of years, but eventually decided that this style was not for me. I feel much more comfortable in beaten-down cyclical stocks or those where I feel there is some catalyst on the horizon

DANIEL GLADI, VLTAVA FUND In theory, a wide-moat business is one that has durable competitive advantage. This can come from various things being a low-cost producer, economies of scale, first-mover advantage, strong brand, intangible assets, network effect, high switching costs, and barriers to entry, among others. In actual practice, many companies claiming to have durable competitive advantage (i.e., wide moat) do not produce above-average returns. The first test as to whether or not we are looking at a wide-moat business is return on capital. Mediocre return on capital shows that this is not a wide-moat business, regardless of what management or analysts might be saying.

If the return on capital is high, then comes a second test: high FCF. There are many businesses with high return on capital, but with small or non-existent free cash flow. If a company produces high accounting returns but needs to reinvest most of its earnings back into the business in order to maintain those earnings, then it is not a wide-moat business. Wide-moat businesses produce a lot of free cash flow. We define free cash flow as cash that can be taken out at the end of the year without harming the business in its current form and size.

If we see high return on capital and high free cash flow, there comes yet a third test. How does the management allocate the cash that the company has earned? Managements in general have two primary functions: to run the business and to allocate the capital. The second function is critical and often overlooked. There are many examples of companies with wide moats but run by managements with strong ability to destroy the value they have created.

If you try to roll up a large snowball, you will not succeed if you keep cutting it by half every two rotations. Truly wide-moat businesses must have high returns on capital, high FCF and managements that allocate capital wisely.

CME Group (Nasdaq: CME) benefits from a

network effect because they have the deepest pool of liquidity and clients who

trade on CME have capital efficiencies since the

company clears its own products and allows for

product off-sets.

If we see high return on capital and high free cash

flow, there comes yet a third test. How does the

management allocate the cash that the company has

earned?



A few examples:

1. Mining and oil companies often claim to have competitive advantages. In reality, although their return on capital is sometimes quite high, their free cash flow is usually disappointing since they have to reinvest a lot into future projects and managements often destroy value through expensive acquisitions and/or suboptimal capital spending.

2. Sanofi (SNY) has high return on capital and high free cash flow. So far, so good. But was the $20 billion acquisition of Genzyme the best use of capital? I scarcely think so. It is a snowball cut in half.

3. WH Smith (London: SMWH). Boring business. But very high ROE, very high free cash flow, with most of it regularly returned to shareholders. Wide moats are sometimes found in unexpected and not glamorous places

MICHAEL MCKEE, MAC INVESTMENT MANAGEMENT I immediately think about pricing power and the ability of businesses to raise prices in excess of inflation. Wide-moat businesses have high gross margins, high operating margins and strong operating cash flows (high and strong refer to sustainable with the opportunity for sustainable improvements). I am a cash flow guy at heart so this is my highest focus and the ultimate outcome of a wide-moat business. Of course, you have to analyze the capex to maintain and capex to grow the business and make sure it is reasonable relative to cash flow from operations. Wide-moat businesses have strong owner earnings (operating cash flow less capex). Analyzing owner earnings relative to the providers of capital for the business (debt owners and equity owners) allows you to determine if you indeed have a wide-moat business. The final challenge is to pay a reasonable multiple of price to owner earnings. This is possible when a good business has a short-term and fixable problem.

A success would be Danaher (DHR), which on occasion sells for a reasonable price and represents the majority of my childrens portfolio and paid 100% of their college education.

A less-than-successful wide-moat business would be Tyco International (TYC), which I got involved in when Dennis [Kozlowski] and Mark [Swartz] ran the show. The company had some wide-moat businesses that ultimately allowed it to survive, but it had a lot of baggage and a terrible balance sheet going into a recession.

CLARK ROBERT NYE, ROBERT W. BAIRD & CO. Generally speaking, a wide-moat business is the result of great managers operating a business with consistently high returns on capital. The characteristics include ongoing repeat business, either because the quality of the product or service is superior to the competition and or there are limited alternative choices. Examples include Apple (AAPL), Microsoft (MSFT), Republic Services (RSG), MasterCard (MA), and Visa (V).

Other distinguishing features include high barriers to entry based on the amount of capital needed to establish a competitive company. Examples include Union Pacific (UNP), Norfolk Southern (NSC), and Intel (INTC).

I immediately think about pricing power and the ability of businesses to raise prices

in excess of inflation.



It could also be an overwhelming existing database or track record that could not be duplicated by new competition. An example is Google (GOOG).

It could also be a protected patent or global brand with ingrained far-reaching channels of distribution. Examples include Qualcomm (QCOM), McDonalds (MCD), Pepsico (PEP), Merck (MRK), Pfizer (PFE), Johnson & Johnson (JNJ), and Abbott Laboratories (ABT).

It could also include regulatory factors where additional licensing is limited.

DAVE SATHER, SATHER FINANCIAL Many companies qualitatively appear to have a wide moat. They may make a great product. However, that does not guarantee a wide moat. A perfect example might be GM. Their pickup trucks, the Corvette and Camaro are all fine vehicles. However, GM has been a very flawed business.

Understanding this, we first focus on finding businesses that appear to have a wide moat from a quantitative aspect. This allows us to avoid preconceived notions about what is a good or bad business. Much like Mohnish Pabrai, we have developed a checklist to help us with our process. The core emanated from the book Warren Buffett and the Interpretation of Financial Statements. It is an underrated book maybe because it is simple to read. It gives a great road map on finding statistically wide-moat businesses.

Any business generating returns on equity and returns on capital consistently above 15% gets our attention. We also focus on debt and pension shortfalls. We want total long-term debt plus pension funding shortage divided by annual net income to be less than two or three. If you also determine that sales, cash flow and earnings are growing each year with great regularity both as a whole and on a per share basis, it starts to become apparent that a business may have a wide moat. In general, the numbers will tell you a story if you let them. Often this leads us to names in the Eat em, drink em, smoke em, go to the doctor and look good when you get there categories. The things we look for are very basic, calculated with simple math. And that is the problem we like to overcomplicate things.

In general, we make mistakes when we take easy concepts and make them hard. It is a lack of discipline. We know what we are looking for but we reach for things we want to be true whether or not the moat is really backing the truth. We made mistakes when we found things that look good numerically, but overestimated our circle of competency to understand that business or the competitive landscape. We have become much better at acknowledging there is no shame in walking away from things you dont know.

Understanding this, we stubbed our toes with Bank of America (BAC) and Citigroup (C). Both were great franchises that were incredibly strong in their industry. And they met our quantitative metrics. However, there was opaqueness to their financials and their derivatives book. We obviously should have thrown these into the too hard to understand category.

One we currently struggle with is Telefonica (TEF). We like the business and the prospects for the long term. However, we violated our checklist on debt. Too much debt combined with the downturn in the European markets has put

we first focus on finding businesses that appear to have a wide moat from a quantitative aspect. This

allows us to avoid preconceived notions about what is a good or bad

business. Much like Mohnish Pabrai, we have developed a checklist to help us with our

process.

The characteristics include ongoing repeat business,

either because the quality of the product or service is

superior to the competition and or there are limited

alternative choices.



Telefonica in a very difficult position. As such, shorter-term issues may not allow them to succeed over the long run.

GUY SPIER, AQUAMARINE CAPITAL MANAGEMENT Moats are at once easy to grasp and difficult to describe. In giving a definition for pornography, U.S. Supreme Court Justice Potter Stewart said, I know it when I see it: The same could be said for wide-moat businesses. What makes the search for wide moats so intriguing is that they are almost always changing, and can come in so many different forms. For example, I never used to think of Berkshires low cost float as a part of its moat, but it is: People in the financial world who can consistently access cheaper money can do more just ask your average hedge fund manager. And it was only in the last two years that I realized that, even in mining, if you are the low cost producer, then that is also a moat.

One of the biggest fallacies I keep seeing is when someone considers all brands as having a good moat around them. Dominant consumer brands like McDonalds and Coca-Cola have a wide moat in all sorts of ways. But Cott Cola, or Smart Balance (which I write about in my annual report) are brands with hardly a moat.

In many cases, it is also hard to tell if the moat is getting wider or narrower. With Netjets, for example, I do not believe that Warren Buffett would have purchased the company if he did not think that the moat was widening. But I think that most observers would agree that the moat got narrower instead. All other things being equal, it is probably better to buy a business whose moat is widening, rather than one which is already wide as we always have reversion to the mean.

Of course, there is a whole added level of complexity that arises when seeking to value a business. The key here is to appreciate a moat that is wide, or widening, but not to pay up for it: A narrow moat in a business that is being thrown out with the bathwater might be a good bet, just as a wide, but highly appreciated moat (e.g. Coca Cola at the end of Goizuetas reign at KO) might make a good teaching example, but may not make a good investment.

JOSH TARASOFF, GREENLEA LANE CAPITAL One of my favorite moats is the volume-price-volume virtuous circle. This is when a company achieves a cost advantage through scale and passes along its efficiency to customers through lower prices. These lower prices attract more customers, which further lowers the cost structure, permitting still lower prices and attracting yet more customers. What is wonderful about this moat is that it is not merely a defensive structure. It is a dynamic process of scaling, which widens the advantage over competitors while growing the business.

Contrast this to my least favorite moat: customer captivity. Customer captivity is, of course, valuable, but it also tends to be static. The mere fact that it is difficult for customers to escape does not imply progress. Companies that thrive as a result of having captive customers sometimes must work harder to gain new customers, who know that they will be locked in. Such companies also

I never used to think of Berkshires low cost float as a part of its moat, but it is:

People in the financial world who can consistently access cheaper money can do more

just ask your average hedge fund manager. And it

was only in the last two years that I realized that, even in mining, if you are the low cost producer, then that is

also a moat.

One of my favorite moats is the volume-price-volume

virtuous circle. This is when a company achieves a cost

advantage through scale and passes along its efficiency to

customers through lower prices.



may fall into the trap of complacency, because the immediate effects of providing a poor customer experience may be minimal.

DAVID WOLTERS, ING I will let Warren Buffett talk about wide moats: an economic franchise arises from a product or service that:

1. is needed or desired

2. is thought by its customers to have no close substitute

3. is not subject to price regulation

The existence of all three conditions will be demonstrated by a companys ability to regularly price its product or service aggressively and thereby to earn high rates of return on capital. (Warren Buffett, 1991)

Example: Sees Candies

Sees has a one-of-a-kind product personality produced by a combination of its candys delicious taste and moderate price, the companys total control of the distribution process, and the exceptional service provided by store employees. (Warren Buffet, 1986)

Example: Red Bull

Red Bull is one of the most popular energy drinks in the world. It was founded in 1984 by Dietrich Mateschitz. Red Bull sells four billion cans each year and dominates its main competitors Monster and Rockstar with 40% market share. Red Bull has a presence in more than 160 countries around the world. Red Bull spends 30-40% of revenue on marketing. Revenue in 2006: $3.7 billion; revenue in 2010: $5.1 billion.

The views expressed above do not necessarily reflect the views of the firms with which the authors are affiliated.

Red Bull is one of the most popular energy drinks in the

world. It was founded in 1984 by Dietrich Mateschitz.

Red Bull sells four billion cans each year and dominates its main

competitors Monster and Rockstar with 40% market

share.

Table of ContentsEditorial CommentaryGuy Spier on The Power of Thank YouCiccio Azzollini Highlights European Investment IdeasMOI Members Share Their Insights on MoatsExclusive Interview with Pat Dorsey on MoatsProfiling 20 Wide-Moat Investment CandidatesAbercrombie & Fitch (ANF) Hawkshaw, Relational, SAB, Third PointAmerican Express (AXP) Bares, Berkshire, Cap World, Davis, MarkelAnheuser-Busch (BUD) Clearbridge, Markel, Scout, WeitzAutomatic Data (ADP) Bares, Cap Re, Cedar Rock, IVA, Markel, West CoastBeam (BEAM) Gamco, Mason, Pershing Square, Sasco, T RoweCB Richard Ellis (CBG) Blum, Marathon, Select Equity, ValueActCostco (COST) Berkshire, Cap World, Davis, Jennison, MarkelCracker Barrel (CBRL) Aster, Biglari, Force, Lombardia, River RoadDaVita (DVA) Berkshire, Epoch, Gates, Pennant, Times SquareEstee Lauder (EL) Cap World, Jennison, Joho, Lone Pine, UBSFiserv (FISV) Brave Warrior, Longview, Meritage, MFS, T RoweGoldman Sachs (GS) Cap World, Chou, Eagle, IVA, Pabrai, Third PointIconix Brand (ICON) Burgundy, Centaur, DFA, Findlay Park, Sarbit, WeitzInteractive Intelligence (ININ) Bares, Brown Advisory, Luther King, T RoweKraft Foods (KFT) Berkshire, Cap Re, Eagle, Pershing Square, West CoastLab Corp. of America (LH) Brave Warrior, Epoch, Harris, Longview, WeitzMonsanto (MON) Blue Ridge, Davis, Lone Pine, Primecap, WinslowUnitedHealth (UNH) Cap World, Clearbridge, Eagle, Pennant, T RoweVisa (V) Akre, Berkshire, Brave Warrior, Lone Pine, Markel, Tiger GlobalWestern Union (WU) Artisan, Bares, GoldenTree, Markel, Relational, T Rowe

Favorite Screens for Value InvestorsMagic Formula, Based on Trailing Operating IncomeMagic Formula, Based on This Years EPS EstimatesMagic Formula, Based on Next Years EPS EstimatesContrarian: Biggest YTD Losers (deleveraged & profitable)Value with Catalyst: Cheap Repurchasers of StockProfitable Dividend Payors with Decent Balance SheetsDeep Value: Lots of Revenue, Low Enterprise ValueDeep Value: Neglected Gross ProfiteersActivist Targets: Potential Sales, Liquidations or Recaps

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Moats Part One