WEBVTT 00:04.900 --> 00:11.160 OK in this video we'll talk about the possession of unique assets and other type of economic Moak can 00:11.160 --> 00:16.490 be created when a company invests in developing and building its own intangible assets. 00:16.530 --> 00:23.430 Examples of such assets include things like patents a strong and widely recognizable brand name copyrighted 00:23.430 --> 00:29.050 intellectual property and specialized permits or other kinds of government issued licenses. 00:29.070 --> 00:34.470 These types of assets provide a natural economic mode for the company's continued and profitable business 00:34.470 --> 00:35.880 operation. 00:36.060 --> 00:40.830 Strong brand name recognition allows these types of companies to charge a premium for their products 00:40.980 --> 00:47.400 over other competitors products because they offer customers something that's limited exclusive or difficult 00:47.400 --> 00:52.690 to replicate as well as something that's often known for having a predictable level of quality. 00:53.490 --> 00:59.010 The perfect example might be Nike which started out as a simple athletic apparel company but has since 00:59.010 --> 01:06.660 become a major cultural institution and a purveyor not only of gear but of status designer fashion labels 01:06.660 --> 01:12.360 have similar business models using their prestige to sell clothing for prices several times higher than 01:12.360 --> 01:13.700 the cost of production. 01:14.440 --> 01:19.810 Not only does intangible assets help a company survive in the long run they also help prevent other 01:19.810 --> 01:26.260 competitors from duplicating the company's products because they're protected by copyrights and patents. 01:26.260 --> 01:29.040 In addition I want you to take note of this. 01:29.200 --> 01:32.520 Popular brands aren't always profitable brands. 01:32.650 --> 01:37.930 If a brand doesn't entice consumers to pay more it may not create a competitive advantage. 01:38.020 --> 01:43.090 That's a red flag telling us that the management is not doing a good job to increase the business earnings 01:43.090 --> 01:46.540 and cash flow from an investors perspective. 01:46.540 --> 01:49.170 A popular brand means nothing to me. 01:49.300 --> 01:56.050 If it's not profitable and if it doesn't show any promise for future growth as an investor what we care 01:56.050 --> 02:00.250 about is how we can make a return on our investments. 02:00.280 --> 02:05.740 If a business is not profitable our investment won't be profitable and will likely take additional risks 02:05.740 --> 02:07.400 of losing our money. 02:07.420 --> 02:10.570 So make sure you pick your stock wisely. 02:11.770 --> 02:16.450 In summary you should look for companies that are protected by the advantage of a premium brand name 02:16.700 --> 02:23.500 a tightly licensed product a loyal customer base and an industry with extremely regulated and complex 02:23.560 --> 02:25.150 injury requirements. 02:25.180 --> 02:30.130 And you also want to make sure the company's management knows how to utilize these intangible assets 02:31.290 --> 02:32.370 in the next video. 02:32.370 --> 02:37.720 I'll talk about the network effect which is another way an economic moat can be created. 02:38.160 --> 02:38.710 OK. 02:38.700 --> 02:39.630 See in the next video.