McKesson is an interesting pick; the largest of an oligopoly of drug distributors, with CAH and ABC. All three have been beaten down over the last 2-3 years, due to a variety of issues: opioid litigation, Amazon competition, govt regulation threat of drug pricing/imports.

Here is an excellent analysis by Vitaliy Katsenelson, describing the business model and durability of MCK’s moat, even from Amazon’s potential entry. I have to thank him for getting me into it in 2018.

Put simply, the laws of economics still apply - even to Amazon. Drug distributors are strong financially and have great scale and a tremendous purchasing-power advantage. Distributors’ stocks may take a dive but their business will be fine in the long run. The only competitive advantage Amazon has against drug distributors is that Wall Street completely ignores its profitability and focuses only on revenue growth.

McKesson is one of the U.S. stock market’s most interesting investments. Its business is future-proof. The demand for its product is not cyclical and is likely to continue to grow as the U.S. population ages. Higher or lower interest rates, recession or no recession, inflation or deflation, McKesson’s earnings power will continue to march ahead for a long time.…

Buffett seems to have come a little late to the party. MCK has been on a tear since Dec 2021, up over 50% in 6 months. Valuation was very cheap 2018-2020. At 17 times FWD PE it probably is at fair value now.

Buffett seems to have shown interest in investing in companies in oligopolies. Some recent examples: HWP (with Dell and Lenovo), VZ (with T and TMUS), airlines (oligopolies from hub dominance). He has since divested VZ and airlines. I wonder where he will look next: package delivery (UPS, FDX)? Both are down over 15% this year, but I suspect their moats are very durable.