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Find Elite Business… Avoid Terrible Ones

Charles Sizemore, Chief Investment Strategist, The Freeport Society

The trick is timing your exit right.

It’s something many of the world’s greatest athletes, actors, and musicians have wrestled with.

Now, it’s Warren Buffett’s turn…

At 94, he’ll be handing over the reins of his investment firm, Berkshire Hathaway, to his long-time lieutenant at the end of this year.

Buffett took control of Berkshire Hathaway in 1965 when it was a failing New England textile mill.

He turned it into a $1.1 trillion global conglomerate.

Thanks to that extraordinary run, Buffett became the sixth-richest person in the world, with a net worth of $168 billion.

Alas, I’m not a Berkshire billionaire (more on that below).

But I am proud to say that the company was a founding position of our flagship Freeport Investor advisory.

I recommended Berkshire when we launched the service, in December 2023.

Readers who bought in then are up 37%.

And that’s not the only way we’ve piggy-backed on Buffett’s brilliance.

As we’ll look at today, one of the best performing investing strategies in Freeport Investor comes straight out of the Buffett playbook.

It’s something we call the Rich Man’s Super Currency.

And as you’ll see today, it’s one of the surest, steadiest ways to build wealth as an investor.

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Growth at a Reasonable Price

Buffett is a value investor.

But in a 1989 letter to shareholders, he warned against buying shares in companies that have run into trouble and are selling for bargain prices as a result…

Unless you are a liquidator, that kind of approach to buying businesses is foolish. 

Buffett focused on something the MBA crowd calls “growth at a reasonable price.” Or as Buffett put it…

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

That’s exactly the approach we’ve taken in Freeport Investor with our Rich Man’s Super Currency strategy.

We look for elite businesses that generate consistent cash flows and then invest in the ones we find.

We call these stocks the Rich Man’s Super Currency because these businesses compound profits over decades and pay out reliable, extremely safe income to their shareholders.

That’s why so many of the world’s high-net-worth individuals own them – including Buffett.

So, what do these Rich Man’s Super Currency businesses look like?

Elite Business Share These Five Common Traits

There’s no set definition of an elite business. But they share a handful of common traits…

1. A durable competitive advantage

Walmart has a durable competitive advantage because its huge global distribution network allows it to sell goods at unbeatable low prices.

It’s extremely difficult for smaller firms to compete against that.

2. An outstanding brand name

Coca-Cola, a Buffett favorite, is a good example. Its logo is recognized across the world, and people associate it with quality soda. It looks and feels like America.

That’s a competitive advantage virtually impossible for competitors to overcome.

3. The largest business in its industry 

When you run your business better than the competition, you can’t help but become the biggest.

McDonald’s didn’t become America’s biggest fast-food chain because it made the best hamburgers. Let’s face it, the burgers are mediocre at best. It did it by running a better business than its competitors.

4. Sells everyday products

An elite business sells products we use almost every day. Think food, oil, soda, medicine, coffee, energy drinks, smartphones, beer, mouthwash, razor blades, and deodorant. These things don’t go out of style.

5. Sells habit-forming, addictive products

Look at the list of the 20 best-performing U.S. stocks from 1957 through 2003. You’ll see that many of them sold habit-forming products.

Phillip Morris is at the top of the list. This cigarette company was the top-performing S&P 500 stock from 1957 to 2003.

Fortune Brands, once called American Brands, is also on the list. It sold cigarettes and alcohol.

PepsiCo and The Hershey Co. are on the list, too. They sell sugar and chocolate and caffeine – all addictive!

Many drug companies are on the list as well. They include Abbott Labs, Bristol-Myers Squibb, Merck, and Pfizer. People get accustomed – even addicted – to taking medicinal drugs.

And so far, the Rich Man’s Super Currency stocks in the model portfolio are doing great.

Inflation? Deflation? Who Cares?

These are businesses that have proven their ability to navigate inflation, deflation, and everything in between.

They’ve prospered through wars and pestilence and through all manner of imbecilic governmental missteps.

They’ve proven themselves to be future proof – meaning they’re able to navigate new technological developments without becoming obsolete.

I can’t share the names of all the Rich Man’s Super Currency stocks I’ve recommended at Freeport Investor here out of respect to my paying subscribers.

But you can get some of the benefit of this approach through the Vanguard Dividend Appreciation ETF (VIG).

It’s a collection of quality American businesses with a history of consistently raising their dividends. To make the cut, a company has to have a string of at least 10 consecutive years of raising their payout.

Accounting figures can be manipulated. But you can’t fudge cold, hard cash. And VIG is full of quality companies with a long history of delivering the goods.

To life, liberty, and the pursuit of wealth,