I like the idea of investing in companies that have market-leading products or services – I believe they have the best chance of sustained success over the long term. This is especially true if, by offering these product or services, the company is able to create a long-term competitive advantage.
Unfortunately, being a market leader in a particular industry is not enough on its own to justify an investment. It is, however, a valid reason to conduct further analysis on the viability of an investment.
Based on my research, the companies listed below have market-leading products or services and are all part of the S&P/ASX 200 (INDEXASX: XJO) index.
3 ASX 200 companies with market-leading products or services
According to its 2018 annual report, Brambles Limited (ASX: BXB) is "the clear global leader in platform pooling". That is, in the sharing of transportation equipment like pallets. Brambles has averaged a return on equity of more than 20% over the past 10 years, which indicates that Brambles has found considerable success by dominating this industry.
In 2008, Codan Limited (ASX: CDA) acquired Minelab, the world leader in metal detection technologies. Since this acquisition, Codan has averaged an impressive annual rate of return to shareholders of more than 20%. Although Minelab is only one part of the Codan business, the results appear to indicate it has been a successful acquisition.
A2 Milk Company Ltd (ASX: A2M) was described by its chair "as the pioneers and leaders of the A1 protein free category" for dairy products. The company listed in 2015, and over the last three years has averaged a shareholder annual rate of return in excess of 100%. The significant upward momentum of the share price appears to demonstrate that investors have faith in the products and strategy of a2 Milk.
Foolish takeaway
Owning shares in a company that is an industry leader has the potential to be very profitable for investors. However, it's still important to assess the price of the shares and the company's fundamentals. These factors also contribute to a company's success and therefore will influence investor returns.
