3 actions with competitive advantage | Morningstar
Wall: We are very focused ben e keith on the ("moat") Morningstar competitive advantage here and I know that has 3 companies a significant competitive advantage for us that also offer dividend yield. What is your first value?
Clay: So we do have a couple of examples. One that has already begun to succeed in your investment is Microsoft (MSFT). We bought the portfolio for more than 12 months ago now. When the value at the time had a return on free cash flow two digits indicating that the company has continued to grow, one should forget ben e keith about it and keep the cash. That we found it a bit much for Microsoft.
We thought it might grow again. Everyone thought at the time that Apple (AAPL) would dominate the world and that Microsoft was going to be one of the biggest victims. Obviously we thought that was not true, which is demonstrated today if you look at the most recent results ben e keith are just out. It is the fastest growing cloud, the new way of computing these days in the business sector. Is twice the size of the ability to trade in the cloud that Amazon (AMZN) and five times the size of Google (GOOG) is by far the fastest growing operator, ben e keith and will be the largest operator.
This is a sign of a company ben e keith with a strong dominance in its market. Generates ben e keith margins, which is 40% in the business ben e keith side of the business and we believe that is very protected, very sustainable, and has repeated since repeated ad infinitum since Microsoft developed. And, therefore, the money generated can return to shareholders ben e keith and that's what the management team is very involved now return cash to the shareholders money. Therefore, it seems very appealing.
Another example is a company ben e keith called Sysco (SYY) with an S in the USA, which distributes food to everyone eating street food in the USA In the USA 45% of food consumed in the streets, and Sysco is by far the largest food distributor to all operators, and is now seeking to acquire ben e keith US Foods, which would lead him to be number one in this market, five to six times larger than its nearest competitor.
So, this is another business scale. The more food place in the distribution channel, the better your margins and operational dynamics. Therefore, the margins are already leading Sysco industry and will be better yet. Furthermore, this provides them free cash flow generated in the business to invest in technology. They are installing an SAP system, which further increases the competitive advantage (moat) of the company. It is a company that is seen as boring. Not very exciting, is not growing quickly because eating out is a fairly stable business. ben e keith Not valued as such a high multiple. So again, we are buying a good yield of free cash flow, paying a good dividend yield, which distributes ben e keith its capital effectively and properly. Exactly the kind of company we want at this time portfolio.
Thus, the third company, which is even further back in the production line. We think it is a value that moves through the production line. Microsoft can consider that it is almost the end. Sysco is in the middle of the road. Finally, we have another example, which is Orkla (ORK), probably no one has heard of Orkla. Orkla is a trademark of Norwegian ben e keith / Scandinavian food, but it is also a conglomerate.
Have other business related to it, which is trying ben e keith come off, something that has no relationship, business aluminum. So it is getting rid of all that, which is very positive for focus on yields, because it is now able to focus back on the core business, which are trademarks, which has not really done. Dominate your market. It is a kind of very local flavor, aranque, etc ... so you have the local domain in their brands, but has not invested in them properly.
Thus, despite its strong market position, its margins are poor compared
