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Types Of Economic Moats To Help You Make Money

There are many factors you should consider when choosing those best-of-breed businesses that have great growth potential and are capable of generating substantial profits for you over the years. So, how important is it that a company has a well-established economic moat? The short answer: crucial.

An economic moat refers to the notion that the business has some durable competitive advantage, not unlike a moat that protects a castle from attack. The wider the moat the easier it is to fend off attackers.

Finding a business with a wide moat is key to finding a successful business to own; the wider the moat, the more predictable its future 20 years down the road. Having a competitive edge, allows for a company to have a degree of predictability.

As an investor, you are looking for not only sustainable growth rates but also consistent growth in cash flow, equity and sales over a 5 to 7-year period of time. With increasing cash flow, profitability for both the business and you the shareholder arises.

With increasing cash flow, a best-of-breed business can whether the ups and downs of the economic business cycle paying off debt when needed or investing capital for expanding into new markets.

Wide moat companies are also protected from inflation since their monopolistic position enables them to raise prices at will.

Here are seven types of economic moats to look for in a potential business:

Brand a product or service youre willing to pay more for because you know and trust it. Companies like Disney and Nike have good brand moats.

Secret – a patent, copyright or trade secret that makes competition difficult or illegal. Examples of these companies are 3M, Pfizer and Apple.

Toll – having exclusive control of a market through government approval or licensing thus being able to charge a toll for accessing that product or service. Such businesses as PG & E, a utility company and Time Warner a media business fit the mold.

Switching – being too much trouble to switch to another provider due to the high monetary and time costs. Microsoft and H & R Block are two good examples.

Low Price – products priced so low no one can compete because they enjoy massive economies of scale due to a huge market share. Both Home Depot and Wal-Mart are examples of businesses that have used pricing to establish an economic advantage.

Network Effect – the ability to quickly dominate a network of end-users by being first in the market. EBay was the first online auction business to dominate the North American market.

Unique Corporate Culture – a way of doing business that would be difficult to duplicate in another business environment. Southwest Airlines benefited from this type of economic moat in the early years.

You need not find a company with multiple moats to consider it to be a potential investment candidate. It should have one moat that seems hardest to cross and one that is sustainable long-term. Once again, the establishment of a viable economic moat shows up in the fundamentals. Companies with consistently high growth rates of over 10% per year in sales, equity and free cash over many years are the ideal candidates.

Auto Electrical Service Watch Out For These 6 Warning Signs!

If the six signs below look or sound familiar, your vehicle may beginning to have starting problems commonly associated with starters or alternators. It is time for some form of auto electrical service. As a lot of vehicle owners have learned from experience, ignoring problems doesn’t fix them, they only get worse! You may up with real car problems ranging from “slow” starts to a car that refuses to start at all.

6 Warnings Signs of auto electrical problems:

1. Dashboard Lights These lights are warnings that something needs immediate attention. Don’t ignore them, hoping they will go off on their own.
2. Strange Sounds If the engine is starting to make strange sounds, schedule an auto electrical service as soon as possible.
3. Burning Smell A burning smell could be caused by over-heating electric connections, indicating a circuit or fuse malfunction.
4. Dim Lights Dimming lights is an indicator of a failing alternator–the car battery can’t keep a charge to run the lighting system.
5. Dead Battery This is especially common during the winter months when lights are on for longer periods of time or if the lights are left on after turning the car off. A simple jump-start should take care of the immediate problem, but don’t forget to have your battery checked. Weak batteries can cause damage to starters and alternators.
6. Electrical Malfunctions — A broken connection or single little wire can lead to a series of electrical malfunctions. A simple auto electrical service, such as reconnecting an on-line fuse or connection can bring life back to your car.

** In the News…Southwest Airlines Will Use Renewable Jet Fuel From Forest Waste.

“According to the Green Car Congress, Southwest Airlines is the latest carrier to experiment with renewable jet fuel. It recently signed an agreement with Red Rock Biofuels to purchase low-carbon fuel made from forest residue. Southwest will buy approximately 3 million gallons of the renewable fuel per year, with the first deliveries expected in 2016 for use in the San Francisco Bay Area. Red Rock Biofuels’ first plant is expected to turn 140,000 tons of the forest residue into 12 million gallons of fuel per year.

KLM Royal Dutch Airlines started using biofuel on flights between New York and Amsterdam last year, while South African Airlines and Boeing plan to test a tobacco-based fuel grown in the airline’s home country. In addition, Boeing is also involved in the development of “green diesel,” which is made by splitting molecules from waste oil and fats with hydrogen. All of these efforts could help lower the airline industry’s overall carbon emissions, which account for 2 percent of the global today. By some projections, that total could rise to 5 percent by 2050.” **

Having problems with starters and alternators? Contact our ASE Certified Technicians at Clausen Automotive by calling (608) 221-8321 or go on-line at for more information about auto electrical service. Since 1975, our family-owned auto shop has proudly served vehicle owners in Madison, WI, and the surrounding communities.