Warren Buffett loves to buy businesses with wide economic moats.
A business with a wide economic moat has a durable competitive advantage over its rivals. Possessing a wide economic moat also deters potential competitors from encroaching into its market space and profits. Some examples of such companies that Warren Buffett has invested in are Coca-Cola and Visa.
In Australia’s share market, there are also companies with wide economic moats.
Here are three such ASX blue-chip companies:
Commonwealth Bank of Australia (ASX: CBA)
Australia’s second-oldest and largest bank has operations spanning across Australia, New Zealand and Asia. It is a leading provider of integrated financial service from retail and business to general insurance and brokerage services.
Over the years, Commonwealth Bank has built a high level of loyalty and trust among its customers. Its robust financial position has seen revenue grow at a 5-year average of around 4% and maintained a steady ROE of about 14% last fiscal year.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is Australia’s largest conglomerate with a market cap of $37 billion. It owns a group of leading household names, including Bunnings Warehouse – the biggest hardware chain, Kmart – the leader in discount department stores, and Officeworks – the top office supplies retailer.
Though Wesfarmers growth has slowed in recent years, it still represents one of the strongest fundamentals on the ASX. Currently, Wesfarmers has an ROE of about 11% and a low debt to equity of only 13%. Both figures do better than the industry average.
Scentre Group (ASX: SCG)
Scentre Group owns and operates Westfield Group – the largest portfolio of premium shopping centres in Australia and New Zealand. Most of Westfield operated malls have created a strong presence in the suburbs where they are located.
Scentre’s portfolio is currently valued at about $53 billion. Based on its third-quarter update, it has a strong occupancy rate of 99.5%. With Scentre’s strong financial position and its well-located malls, it will be difficult for competitors to replicate its success.
Motley Fool contributor Ivan Loh owns shares of Wesfarmers Limited. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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