‘Economic moats’ allow companies to maintain their competitive advantage, so are essential for long-term profitability, but also for responding to a structural threat. Warryn Robertson, Portfolio Manager at Lazard Global Equity Franchise lists a cluster of stocks in this short video, whose moats enabled them to turn such a threat into an opportunity.
Discussing some of the largest global tech names, as well as an ASX growth stock, Warryn summarised this in saying: “What we did was to essentially make a call that it was a far easier move to transition those existing customers to a new offering than for someone to come in and to offer them a completely new service.” Watch the short video for the full story.
- Question the sustainability of the economic moat for a business: Can the business produce robust cash flows over the very long-term?
- Look for businesses that can adapt their models. For example, players such as SAP, Oracle, Microsoft, Intel, and Computershare, who turned the threat of the cloud into opportunities.
- Their incumbent positions provided a long-term economic moat that enabled the transition to occur. For example, consumers pay Microsoft monthly rather than intermittently, leading to better revenue streams and margins for the business.
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You can read further insights and analysis from Warryn and the team at Lazard here