At Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B)'s last annual meeting, Charlie Munger called POSCO (NYSE:PKX) the best-run steel company in the world. That should be telling enough in itself, but there's much more to this story. Steel is subject to the whims of just about any commodity-oriented firm, so what makes POSCO so good?

For starters, the company operates in the pseudo-socialist, labor-friendly market of South Korea. POSCO was a public (government-owned) entity until 2000, when it became fully privatized. Yet it retains a good number of the benefits of a public company, including a locked-in rate of return in Korean markets. You read that correctly. The company is basically guaranteed some level of profit for each ton of steel it moves in the Korean market. When Korean sales clock in at 71% of sales in the last fiscal year, that's nothing to scoff at.

I'll put it as simply as possible: POSCO's the closest thing to a monopoly you'll find on American exchanges, short of perhaps Microsoft (NASDAQ:MSFT). This has the very simple and obvious effect of making POSCO a huge cash cow.

But there's more to this investment thesis. POSCO possesses significant advantages relative to domestic steel purveyors. Wages and benefits in South Korea are lower than those in the U.S., and Koreans work six-day weeks.

There's also a little nation called China. POSCO possesses a significant advantage in its proximity to China, reducing its costs of transportation and distribution. While China's demand is subject to the vagaries of its own rate of economic and industrial development, I'd expect POSCO to be among the first foreign companies to benefit from China's appetite, despite increased reach on the part of competitors Mittal (NYSE:MT) and U.S. Steel (NYSE:X). Recent investments in Mexico and India have increased POSCO's access to markets outside Korea, and boosted the potential for incremental upside returns.

The company is second to none from a technological standpoint. It recently opened its first plant employing FINEX technology, which reduces the company's exposure to raw materials costs. In addition, opportunistic formulation of partnerships and joint ventures has enabled the company to acquire its raw materials at a relative discount. Furthermore, recent implementation of Six Sigma has helped create a more efficient enterprise.

What's more, the company's selling for a mere 1.2 times book value. This valuation doesn't account for the astronomical earnings increases (and in turn, retained earnings) POSCO has experienced over the past few years, but there's no denying that it's pretty cheap on a relative basis. I'd ideally wait for a slight pullback, particularly given the ongoing idiosyncrasies to which steel markets are subject. But that's only one investor's opinion, and it doesn't take into consideration what some consider a long-term, secular bull market in steel and basic commodities. Given its unique regulatory and structural advantage, POSCO is sure to post consistent and continuous cash flows.

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POSCO is a Motley Fool Income Investor recommendation, while Berkshire Hathaway, Microsoft, and Mittal are Inside Value picks. Follow the preceding links to try either newsletter free for 30 days.

At the time of publication, Fool research analyst Mike Olsen owned shares in Microsoft, and the opportunity to invest in a good ol' fashioned monopoly. He's a contributing analyst for Motley Fool Global Gains and was rated number 302 of 13,861 CAPS players at the time of writing. He also likes sandwiches with fresh mozzarella, prosciutto, and sun-dried tomatoes. The Fool has a disclosure policy.