OK in this video we'll talk about the possession of unique assets and other type of economic Moak can
be created when a company invests in developing and building its own intangible assets.
Examples of such assets include things like patents a strong and widely recognizable brand name copyrighted
intellectual property and specialized permits or other kinds of government issued licenses.
These types of assets provide a natural economic mode for the company's continued and profitable business
operation.
Strong brand name recognition allows these types of companies to charge a premium for their products
over other competitors products because they offer customers something that's limited exclusive or difficult
to replicate as well as something that's often known for having a predictable level of quality.
The perfect example might be Nike which started out as a simple athletic apparel company but has since
become a major cultural institution and a purveyor not only of gear but of status designer fashion labels
have similar business models using their prestige to sell clothing for prices several times higher than
the cost of production.
Not only does intangible assets help a company survive in the long run they also help prevent other
competitors from duplicating the company's products because they're protected by copyrights and patents.
In addition I want you to take note of this.
Popular brands aren't always profitable brands.
If a brand doesn't entice consumers to pay more it may not create a competitive advantage.
That's a red flag telling us that the management is not doing a good job to increase the business earnings
and cash flow from an investors perspective.
A popular brand means nothing to me.
If it's not profitable and if it doesn't show any promise for future growth as an investor what we care
about is how we can make a return on our investments.
If a business is not profitable our investment won't be profitable and will likely take additional risks
of losing our money.
So make sure you pick your stock wisely.
In summary you should look for companies that are protected by the advantage of a premium brand name
a tightly licensed product a loyal customer base and an industry with extremely regulated and complex
injury requirements.
And you also want to make sure the company's management knows how to utilize these intangible assets
in the next video.
I'll talk about the network effect which is another way an economic moat can be created.
OK.
See in the next video.