Businesses which qualify under this strategy includes but not limited to are McDonalds, Wrigley, Pepsi, Coca Cola, Wal-Mart, Johnson & Johnson, P&G, Walgreens and the likes.
If you have bought Johnson & Johnson in 1992 at $13 with valuations of 37 times earnings, at the price today, the compounded return is 12%. For P&G in 2001, if you got at $33, the return is 13%. At Wal-Mart, at $11.50 in 1991, the return is 11%. At Walgreens, at $18.50 in 1998, it is 12%. At Dollar General which is lately being sought to be brought out by KKR, in 1994 at $4.30 for earnings of 24 times, before KKR offer, the return is 12%, after KKR offer, the return stands at 14%.
One thing is clear here, this strategy of buying the best businesses can give better return than growth or indices. But it is still not the best yet. The best strategy is to buy the best business when the price is at a cheap valuation – meaning when investors do not value the earnings of the business by as many times.