Warren Buffett attributes much of his success to having a well-defined investing philosophy. He invests in best-in-class companies that have a terrific competitive advantage over rivals, low debt, a strong history since listing, are able to consistently grow revenue and earnings, and those that do not offer a commoditised product.
These characteristics are important as they give Buffett and his Berkshire Hathaway team confidence that superior returns can be expected in the future.
One to Watch
When looking at the top ASX stocks, a case can be made that many stocks fit the Buffett mould, however I believe there's one that stands out more than most.
Brambles Limited (ASX: BXB) is the world's largest supplier of pallets, crates and containers, and adds value to customers by providing supply-chain solutions thanks to its global network.
Brambles crates and containers are everywhere and the business is exceptionally resilient to the global economic environment. For example, sales of groceries, beverages, and personal goods vary little during downturns, and companies are always looking for ways to reduce supply-chain costs.
The Secret
The great secret to Brambles' success and dominance is the group's equipment pooling service. The unparalleled scale of Brambles' network means that it can pool the goods of customers with similar products or destinations together in order to reduce overall costs.
This is great for the customer, and also for Brambles, as it makes the customer more reliant on the superior Brambles service.
Growth, Growth, Growth
Unurprisingly, management are predicting a significant amount of growth for a company with such a dominant and established global position. The biggest contribution will likely come from price increases in the key European and U.S. markets after a long period of stagnation, however expansion into Central Europe, Latin America and some Asian countries will also provide profit growth opportunities.
Low Debt, Great Outlook
Brambles has been able to consistently keep its balance sheet gearing at around 40% and the management team has been able to successfully combat increased competition in the U.S. market. Experts expect Brambles to benefit from the improving US economy and expansion into new markets in order to hit Earnings Before Interest and Tax (EBIT) of over $1 billion in the 2015 financial year.
