When you read the financial papers and the general emphasis is on protecting your money rather than choosing from the many opportunities to grow your money, you need to look at if at companies with moats. The bigger the moat, the better and a moat means lasting competitive barriers to entry. Ian Tam from Morningstar Research recently looked at some companies along with companies showing positive earnings and price momentum. These should be the best of the breed stocks.

Morningstar defines moats through the specific qualities associated with economic moats:

• intangible assets – brands, patents, regulatory licenses
• switching costs
• network effect – when the value of goods or services sold increase for both existing and new customers
• cost advantage
• efficient scale.

The combination of these qualities will determine how wide the moat is. All the stocks below have wide moats.

The other columns are Moringstar Fair Value Estimate Dividend by the Price, Earnings reported quarterly, 5 year growth rates and dividend yields.

Name   Company         Fair Value   Quarterly Earnings  5 Yr     3 Month   Yield

Estimate/Price  Momentum       EPS     Price Change

1. Gilead Science           1.23                 13.69%              78.88   5.99     1.65%
2. Allergan PLC              1.17                   9.3                     61.96  16.44    0
3. Magellan Midstream 1.26                4.6                     22.86  0.22      5.06
4. Monsanto                     1.33                  1.6                     17.15    14.66    2.21
5. Time Warner               1.33                  0.61                   17.05     2.71     1.98
6. Walt Disney                 1.17                  6.62                   20.51     11.78   1.24
7. Cerner                            1.15                   6.36                   21.69     0.28    0
8. McKesson Corp            1.17                   4.85                   19.64    2.98     0.59
9. Ritchie Bros Auction  1.16                    5.51                   12.41      0.15    2.47
10. CBRE Group                   1.04                   5.94                  21.81     14.59   0

According to Moringstar Research if you kept yourself in the top 10 names for the last few years, you would have average 10.8% return as opposed to the S&P 500 of 7.8%.

Linking to dividend paying stocks, often because these stocks have a moat they can continue to pay the dividends for a long time to come because they are profitable or regulated to ensure they have a good return on investment. Stock markets go up and down, only in hindsight do you know what happened, you might as well pick up income along the way and try to invest in the best possible companies. The above 10 show a starting point.

There are more questions than answers, till the next time – to raising questions.