Forget ten, when it comes to looking for invest-able businesses, there are really just three commandments to abide by.

And for your investments in these businesses to succeed, there is a fourth.

Follow these, and the laws of business and investing shall bring forth great wealth and much prosperity.

Abide them not, and thou shall find thyself lost in a confusing sea of talking business head pundits, stock pumpers and dumpers, and self-proclaimed wizards and mages espousing such mystical secrets as MACD and Bollinger Bands.

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Some of these otherwordly methods may appear to work over short time periods, but be assured - nobody in the Forbes Billionaires list got there by pouring over stochastic indicators. No, these true masters of investing got there one way.

And that was by owning great businesses for long periods of time.

So let's come down from the mount with our digital tablets and look at the word of the investing gods, spoken through the success of the true investing masters throughout history.

Thou Shall Own Businesses With Huge Addressable Markets

You don't make a fortune owning a lemonade stand.

Truly great investing success - stocks that increase 5, 10, even 100 times your original investment - happen when the underlying companies can grow to massive market capitalizations.

Companies only grow to massive market capitalizations when they have immense addressable markets to support immense revenue generation.

Am I going too fast?

Simply put, look for companies that offer solutions or products needed by a LOT of consumers and/or businesses. The total addressable market (TAM) should be reasonably 10 times or more the company's current revenue run rate (the higher the multiple, the better). And the company should be generating at least 10% revenue growth annually (again, the more the better). These two factors help ensure that your stock can increase its market capitalization for many years to come.

If it can do that, your investment is likely to increase in kind.

Thou Shall Own Businesses With Recurring Revenue

You don't buy a new car every day, and most people don't buy from just one car maker.

Why does that matter?

Because Ford (F) or General Motors (GM) has to constantly spend marketing and R&D dollars to earn your sale. Their revenues become unreliable, unpredictable, and subject to serious competition and economic conditions they have no control over. This can lead to some very precarious situations - as we saw with both companies in the late 2000's recession (GM even went bankrupt).

Now, compare these two old economy stalwarts with another one that's even older: Coca-Cola (KO). Coke sells low-priced, quickly consumed products that have to be purchased over and over again - a form of recurring revenue. Customers essentially pay Coca-Cola many times a month (often many times a day). The company knows it can rely on this. Management knows it is highly unlikely that Coke's revenues would ever decline more than a few percentage points in a year. This allows them to more accurately plan marketing expenditure, finance the business with debt, and so forth.

It also protects Coca-Cola investors from massive declines in the stock price over short periods of time.

Recurring revenue just makes business a lot more predictable. If you think about the companies that have thrived for many decades, you will invariably find a recurring revenue business model behind them.

Thou Shall Find Economic Moats

Economic moats are just what they sound like - structural advantages that prevent a firm's existing sales and cash flows from being eaten into by competitors.

Big market potential and recurring revenues are great, but if a company needs to spend a lot of that revenue just to keep its existing customers, continuing to grow becomes very difficult.

Think of it as trying to walk up a down escalator. A company's moat is represented by the speed of that escalator. If it is moving rapidly, it becomes extremely hard to climb it - we would have to exert a lot of energy just to make small progress. On the other hand, if it is moving slowly, we could step it at a leisurely pace and still get to the top.

Wide moats are slow escalators.

So how can you identify a wide moat? Here are the different ways.

Thou Shall Own, Not Trade

The final "commandment" is not a characteristic of a business, but a characteristic of the investor.

Incidentally, it is also the most important of the 4.

Let's go back to the Forbes Billionaires list. In fact, let's just look at the top 5. In 2020, they were:

1. Jeff Bezos (Amazon.com (AMZN))
2. Elon Musk (Tesla (TSLA))
3. Bernard Arnault (LVMH Group (LVMUY))
4. Bill Gates (Microsoft (MSFT))
5. Mark Zuckerberg (Facebook (FB))

Notice a pattern here?

Yes, many of these were company founders. But that's not the reason they are super-rich. Plenty of great companies have founders that sold out far too early. Anyone heard of Ronald Wayne?

No, these people are rich because they OWNED GREAT COMPANIES for LONG PERIODS OF TIME, allowing their wealth to compound.

Elon Musk didn't panic and sell when Tesla faced production challenges and major liquidity risk in the mid-2010's. Bill Gates didn't get sick of a decade of stagnating business and stock results with Microsoft in the 2000's. Mark Zuckerberg didn't blink through Facebook's seemingly endless gauntlet of challenges, ranging from a huge business model transition to mobile and advertising, constant privacy questions, content moderation, etc.

So it is the same for us as small owners. True wealth comes from sticking with great businesses over time, with conviction that the other 3 commandments will get the company (and our investment) through any tough times that may arise.