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By Christine Benz and Jason Stipp | 08-29-2013 04:00 PM

Five Gifts From Warren Buffett

On the occasion of his 83rd birthday, we examine how the Berkshire chairman's principles help investors succeed, too.

Christine Benz: Hi. I'm Christine Benz for Morningstar.com, and welcome to The Friday Five. Warren Buffett is turning 83 on Aug. 30, so we decided to honor the occasion by discussing some of the key gifts that he has given investors over the years.

Joining me to do that is Jason Stipp. He is site editor for Morningstar.com.

Jason, thank you so much for being here.

Jason Stipp: Great to be here, Christine.

Benz: Jason, you say that the key gifts that Buffett has given investors is that he has given them some of these frameworks to think about their own investing plans, and you've listed five key concepts that you think really have helped lead to better investment decision-making.

Let's start with the first one, Jason. It's the concept of moat, and that's something we've definitely incorporated into our own stock rating philosophy. Let's talk about that concept and why it can be so impactful when investors attempt to pick companies.

Stipp: A lot of these concepts won't be groundbreaking to regular Morningstar.com readers. As you said, we have a moat rating, but I hope to add a few new angles and dimensions on some of them anyway.

The economic moat rating is the idea that strong companies with wide moats have sustainable, competitive advantages. That means they can keep more of their profits longer than companies that don't have those competitive advantages. There are few sources of moat. It makes sense to look for companies like this, because they're going to be stable, buy-and-hold companies that will do better than their peers, even over a very long time periods.

The interesting thing to note about the moat rating, however, is that when a company has wide moat, Morningstar data has found that our fair value estimates are also much more certain about that company. It makes sense, because this company is more stable, it's easier to forecast its returns. But especially for 5-star wide-moat companies, we found the relationship between that 5-star rating and its returns is very strong. So if you're seeing wide moats at a low cost, it's a lot easier to forecast it's going to do well, and in an age of a lot of uncertainty, that's something that we found increasingly you can bank on with more confidence.

Benz: So generally speaking, if you're going through our data and you see that our analyst has a company assigned as having a wide moat rating, you can generally have more confidence in the other things that they're saying about it. So their price to fair value is more likely to be correct and so forth.

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