How a company weathers adversity tells you interesting things about a business, according to Warren Buffett. Among the things it shows you is not only the resiliency of a company, but also how wide its moat truly is.
“If you see a business take a lot of adversity and still do well, that tells you something about the underlying strength of the business,” Warren Buffett said at the 2000 Berkshire Hathaway Annual Meeting. “So, occasionally, you will find that an interesting test of the strength of a business. Coca-Cola had some problems, you know, in Europe. But it comes back stronger than ever. They certainly had problems with New Coke, and they came back stronger than ever. So you do see that underlying strength. And that’s very impressive as a way of evaluating the depth and impenetrability of the moat that we talked about earlier.”
Buffett’s full explanation on adversity and how it tests a business
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