Finding an ASX share with a 'monopoly moat' might sound like a difficult task. After all, aren't monopolies meant to be illegal outside of the famous board game?
Well, yes. But there are some businesses that are just too hard to compete with. We've seen the difficulties that various airlines have had in competing with Qantas Airways Limited (ASX: QAN) throughout the last few decades. While Qantas keeps on flying, competitors like Ansett and Virgin have seen bankruptcies.
A monopolistic business by definition has a moat. A moat is a term coined by the legendary investor Warren Buffett. It refers to the protections a company can surround itself with to protect it from competitors, much like a castle can surround itself with a moat to guard against marauders.
There are many different 'moats' a company can possess, such as a powerful brand. But if it is difficult for competitors to even compete with a business (it takes an awful lot of money to start an airline, for example), then that business has a very powerful form of a moat.
So are there any 'monopoly moat' companies listed on the ASX?
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Fund manager names 3 ASX shares with monopoly moats
Well, yes, according to a recent article from Livewire. Livewire interviewed several ASX fund managers for their idea in this area. Leon de Wet of Elston Asset Management named three.
The first is Transurban Group (ASX: TCL). Transurban runs the largest network of tolled roads in Australia. Chances are that if you live in a capital city, you regularly use one of Transurban's toll roads. This is particularly so in Sydney. Toll roads are extremely difficult to compete against, and are more or less 'essential' services for millions of motorists and truck drivers.
Another is electronic property conveyancing platform provider PEXA Group Ltd (ASX: PXA). De Wet notes that PEXA is "estimated to have handled more than 80% of the property transactions in Australia for the six months to December 2021". That indeed sounds like a monopoly moat company at work.
But de Wet's last pick is a newcomer to the ASX. It is none other than The Lottery Corporation Ltd (ASX: TLC). Lottery Corp shares hit the ASX last week after they were spun out of Tabcorp Holdings Limited (ASX: TAH). De Wet reckons lotteries "have historically proven to be defensive with revenue resilient regardless of the economic environment driven by a loyal customer base".
He also calls lotteries and Lottery Corp's Keno "infrastructure-like businesses", but also "capital light". De Wet also notes the infrequent licensing opportunities and lucrative stream of tax revenue that the businesses offer.
So those are three ASX shares that this fund manager reckons display characteristics of 'monopoly moats'. If this analysis proves accurate, it could well mean investing in these companies is a good long-term bet.
