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This Is a Buffett Investment If I've Ever Seen One

Jason Moser
November 14, 2011

This article is part of our Rising Star Portfolios series. Click here to follow Jason on Twitter.

It's getting tougher and tougher to find solid investments. Thanks to a seemingly new global debt crisis every day, it feels like it's easier finding a needle in a haystack! But I do believe I've found an investment of which even Warren Buffett would approve, one that I believe will continue to clean up for some time to come.

The company
(NYSE: ECL  ) is the market leader in a very large and diverse line of work. Simply put, the company develops and markets products and services for the hospitality, food-service, health-care, and industrial markets the world over. From cleaning and sanitizing products and programs, to pest elimination, and maintenance and repair services, Ecolab is the vendor of choice for lines of work as varied as commercial food service chains like McDonald's (NYSE: MCD  ) , schools, governments, military, and even correctional facilities.

What's so great about it anyway?
Razors and blades:
Ecolab gets its equipment (the razors) into the hands of its customers and then just keep on selling the consumable cleaners and solutions (the blades), which incidentally are mostly only compatible with its own equipment. In fact, 90% of Ecolab's revenues are recurring in nature, and I'm a big fan of recurring revenue.

The leader of the pack: Ecolab has about 10% market share of a $57 billion global market and has nearly a three times advantage over its next largest competitor. As CEO Douglas Baker put it in a recent investor day conference: "Our ultimate advantage and the ultimate barrier to competition is our sales and service capabilities." That's not only an effect, but also a cause of its formidable scale.

More markets?: Ecolab is in the process of wrapping up its $5.4 billion acquisition of Nalco (NYSE: NLC  ) , which will add considerable scale to its already large global presence. This acquisition will open up Ecolab to Nalco's 30% share of the $6 billion global water services market, as well as additional exposure to the paper and energy services -- representing an additional $2.5 billion market opportunity. If the company can integrate this acquisition nicely, it should open the floodgates for some additional top-line growth.

Mucking up the waters
Of course, plenty of things could dirty this investment. Here are a few things to look out for:

It cuts both ways: Just as the Nalco deal is a potential value creator, if it fails to go off without a hitch or if problems arise, there could be re