Vocabulary

What is an Economic Moat?

Economic Moat is a term popularized by Warren Buffett that refers to “business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. The competitive advantage is any factor that allows a company to provide a good or service that is similar to those offered by its competitors and, at the same time, outperform those competitors in profits. An example of a competitive advantage would be a low-cost advantage, such as cheap access to raw materials.

“In business, I look for economic castles protected by unbreachable moats.” – Warren Buffett

 

Sources: Investopedia.com and Morningstar

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