31 Aug 2023
Evaluating Moats, Management, and Price with Todd Wenning
There are thousands of publicly-traded companies for investors to choose from on any given day. What's the best way to evaluate them -- and to separate the cream from the crop?
7investing CEO Simon Erickson recently interviewed Flyover Stocks' founder Todd Wenning. Todd has spent two decades in the investing industry -- representing the buy-side with Ensemble Capital, the sell-side with Morningstar, and the retail side with The Motley Fool. He's now launched his own Flyover Stocks newsletter to help investors find overlooked, quality companies.
In the first part of the conversation, Simon asks Todd about his investing methodology. Todd describes that "Strong Buy" opportunities are often found at the collision of Moats, Management, and Price.
A moat refers to a company's competitive advantage. Easy to comprehend but more challenging to quantify, moats represent an "unfair advantage that makes a business sustainable." Todd explains that there are different types of moats -- such as legacy or reinvestment moats -- which should be considered as management plans out their capital allocation strategy.
The two then discussed management, which they framed as capital allocation decisions. Dividends are still a popular allocation strategy, as they show a discipline and commitment to returning cash directly to investors. Management teams can also pursue acquisitions or execute strategic buybacks with their company's profit stream.
In the final part of the conversation, Simon and Todd discuss why Costco (Nasdaq: COST), Old Dominion Freight Line (Nasdaq: ODFL) and Worthington Industries (NYSE: WOR) might be intriguing opportunities for investors to add to their watch list.
Publicly-traded companies mentioned in this podcast include Costco, Old Dominion Freight Line, Procter & Gamble, Starbucks, Uber, and Worthington Industries. 7investing’s advisors and/or its guests may have positions in the companies that are mentioned.
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