Buy market leaders with superior franchises

• Financial strength alone does not guarantee a company%27s success
• Eventually every great company will disappoint%2C which creates opportunities

As a professional money manager, one of the first things I sought to measure when looking for market leaders was what we called the franchise value. When a company possesses a strong franchise it not only tends to lead its competitors in brand awareness but in pricing and purchasing power — important financial attributes of successful companies.

Pricing power plus purchasing power equals a healthy profit margin, which creates corporate wealth and flexibility: the kind of flexibility that allows management teams to invest in research and development or acquire a competitor with a leading-edge technology or product. A company with a superior franchise is better able to maintain its industry leadership thanks to their financial wherewithal.

Eventually every great company will disappoint, which creates opportunities for savvy women.

Financial strength alone does not guarantee a company's success, but it increases the odds. Eventually every great company stumbles. A marketing or new product miss provides a competitor with an opportunity to take share. A smaller, nimbler company develops a new technology that threatens. Inevitably the stock price of the industry leader declines and at that point we are presented with an opportunity to own the stock or buy more at reasonable prices. That is the good news.

The bad news is that Wall Street rarely shares our enthusiasm after disappointments, so we must have something — like an outstanding franchise — to hang our investing hat on. Great investors have always understood the power of franchise value. Iconic investor Warren Buffett focuses on owning the shares of companies with dominant brand or market share such as American Express, the Coca-Cola Co., Walmart, Wells Fargo & Co., IBM and the Proctor & Gamble Co., to name a few. He has owned many of these stocks for decades. That's because they are companies to own for a lifetime; they are franchise players.

Women are too busy to watch our holdings each and every day. We want to invest with the confidence that although our stocks may not go up each month or even each year they will survive and generate solid returns over time.

So take a look at your list. Do the companies you've identified lead, or even better, dominate their industry? Think: Starbucks, Nike, Apple or the stocks Buffett owns among others. If not, set them aside for now. And let's focus on the leaders. We will return to the next tier at a future date when we have a little more experience under our belt. Next week with our list of leaders we are going to examine long-term viability — what I like to call the buggy-whip factor.

Nancy Tengler spent two decades as a professional investor. An author, financial news commentator and university professor, her book "The Women's Guide to Successful Investing," will be released by Palgrave Macmillan in August.