Hedge fund manager Jonathan Tepper, advocate for healthy competition and author of The Myth of Capitalism: Monopolies and the Death of Competition, is using his research skills and market knowledge to spot “dominant companies” with competitive edges. This according to a recent article in CityWire.

The article notes: “The astute reader may have spotted a rather glaring contradiction in Tepper’s approach—how can one write a book highlighting the issues caused by monopolist companies and still  actively seek out these same groups for your portfolio?” But Tepper rebuts by differentiating between “bad monopolies”—those that have gotten their edge nefariously—and those that have cultivated competitive advantages more honestly.

According to Tepper, who founded Prevatt Capital, “there is nothing contradictory about being against bad monopolies and investing in companies with competitive advantages.” He adds, “The most important thing is incremental returns on invested capital…What you really want to focus on are companies that can produce high returns on capital over the next five or 10 years.”

Like Warren Buffett, Tepper focuses on what gives companies a competitive advantage, or a ‘moat.’ In his opinion, brand names, high market share, and low-cost strategies don’t do it, citing high-profile failures in all three categories. “Having multiple sources that overlap is the best situation and a network effect combined with high switching costs is more attractive than a brand name,” according to Tepper.