5 Wide Moat Companies To Survive A Bear Market

 

Moreover, companies with a wide moat tend to be more stable and less volatile than those without. That makes them less likely to experience sharp declines in value during periods of market turmoil.

 

All in all, this approach to investing is a great way to build a diversified and resilient portfolio that can weather any storm.

 

With that in mind, here are five wide-moat companies you can invest in today.

 

 

In terms of brand value, few names are more recognizable in the payments-processing space today than Mastercard.

 

Indeed, the company’s credit card network is operational in more than 200 countries, and is the preferred choice of over 100 million merchants worldwide.

 

Its total transaction volume reached $13 trillion in 2021, and the business estimates it has a further $37 trillion opportunity in the core payments segment alone.

On top of that, Mastercard is well-positioned to benefit from the increasingly rapid trends moving us toward a cashless society.

 

The company’s products are built for electronic payments, and its network is naturally capable of handling the large volumes of transactions that arise from that.

 

This makes Mastercard one of the most likely candidates to capitalize on the growing demand for digital payment solutions, ensuring its business moat will last for a long time into the future.

 

Despite its large revenue generation, MA isn’t a business with low profitability either. Its adjusted operating margin came in at 57.7% for the third quarter of 2022, a number that far exceeds the Information Technology industry median of 12.1%.

 

Discount variety store Dollar General has long benefited from the advantages of a strong business moat.

 

In fact, with over 18,000 stores across the United States, much of its competitive dominance stems from its large brick-and-mortar footprint.

For instance, its store locations are typically in close proximity to its customers, which results in lower transportation costs and increased customer loyalty. Furthermore, with its wide range of cut-priced items, the company offers great cost savings, allowing customers to budget more efficiently on their weekly grocery bills.

 

Dollar General’s low-cost store format is also difficult to replicate. Indeed, its small store size and efficient operating model enable it to offer lower prices than its competitors, and its focus on selling basic necessities makes it less susceptible to changes in consumer tastes than other retailers. This has helped spur its quarterly net sales by 9%, bringing in a total of $9.4 billion for the last reporting period.

 

Northrop Grumman is a world leader in aerospace and defense technology. The company’s products include some of the most technologically advanced aircraft, missiles, space systems, and spy satellites.

 

Northrop Grumman has a strong competitive advantage in many of these areas, which has allowed the company to win numerous contracts from the US government and its allies.

 

In fact, one of NOC’s specialties is its vast experience in designing and manufacturing complex aerospace systems. The company has been involved in some of the most important military programs in recent history, such as the F-35 Joint Strike Fighter and the B-2 Spirit Stealth Bomber.

 

Northrop Grumman’s deep understanding of the challenges involved in designing and building such systems gives it a significant edge over its competitors.

Another key advantage for NOC is its strong financial position. The company recorded impressive operating cash flows of $1.3 billion for the third quarter of 2022, which gives it considerable flexibility to invest in new products and technologies.

 

Northrop Grumman also benefits from economies of scale and is one of the few companies with the size and resources to develop and produce complex aerospace systems.

 

Finally, Northrop Grumman’s close relationship with the US government provides a significant lead when it comes to winning high-value, multi-year contracts. The company has a long history of working with both the Department of Defense and NASA, which gifts it an inside track on upcoming opportunities.

 

While it’s the case that you can normally point to one or more distinct aspects of a company’s operation that lend it a strong business moat, sometimes it can simply be the performance of a firm’s balance sheet that makes it such a great investment.

 

One such venture that matches this description is Medifast. The company produces and sells nutrition and weight-loss products through a multi-level marketing and franchising business model.

 

Given that 73% of the US adult population is now classed as either overweight or obese, MED’s proven success in the weight-loss space affords it a massive market opportunity.

The key to Medifast’s effectiveness is its focus on healthy nutrition. All of the company’s products are designed to promote healthy weight loss by providing the body with the nutrients it needs to function properly. MED also offers a variety of programs to help people lose weight safely and effectively. These programs are led by trained coaches who provide support and guidance throughout the process.

 

The strength of the firm’s franchising system and its ability to deliver tangible results for its customers has resulted in a suite of robust financial metrics for the company.

 

Indeed, Medifast’s trailing twelve-month gross profit margin is a huge 72.3% – which is all the more remarkable considering that the business trades at a forward earnings multiple of just 8.25.

 

Moreover, MED’s return on total capital is massive at 63.1%, giving investors confidence of mind that the venture is being run in a highly efficient and profitable manner.

 

To further complement Medifast’s ledger, the business also provides shareholders with a very attractive dividend. Its yield is a Consumer Staples sector-busting 6.09%, while the distribution boasts a staggering 37.7% compound annual dividend growth rate. And despite having a slightly elevated payout ratio of 47.0%, the company has zero debt and is in no danger of not having the funds to cover its dividend obligations.

 

The Tractor Supply Company is an American retailer that offers home improvement, garden maintenance, agriculture and pet care products. It is the largest rural lifestyle retailer in the United States and operates more than 2,100 stores across the country.

 

The business benefits from several competitive advantages, including its focus on rural and underserved markets, favorable demographic trends, and strong brand recognition.

Indeed, TSCO’s attention to rural and underserved areas has been a critical driver of its recent success, as these markets have enabled it to build a loyal customer base and generate higher sales per square foot than its urban counterparts.

 

In addition, TSCO also benefits from favorable demographic trends, with the population of the United States shifting from urban areas to otherwise more suburban and rural ones instead. This shift is primarily driven by millennials and younger cohorts seeking affordable housing options and a better quality of life.