Buffett's Strategy Lives in These Mutual Funds

Another stock that Coats holds is Automatic Data Processing(ADP). The company dominates the market for managing payrolls. With investors worried that layoffs could shrink ADP's revenue, the shares dipped this year. Coats says the company retains a firm grip on its niche and should gain market share during the recession.

To own small- and mid-cap stocks with wide moats, consider FBR Focus(FBRVX), which has returned 12% annually during the past decade. The fund aims to buy growing companies and hold them for years. A favorite holding is American Tower(AMT), which operates 23,000 towers used to transmit wireless calls.

In many local markets, the company has a near-monopoly. Some homeowners oppose building towers in their neighborhoods. So once one is built, it can be difficult to construct a second tower nearby, manager David Rainey says. He says American Tower is growing by making acquisitions abroad and finding more cell-phone companies to use existing facilities. "This company can continue achieving above-average growth for the next five or 10 years," he says.

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