American investor Warren Buffett said in 1985:
“There are some businesses that have very large moats around them and they have crocodiles and sharks and piranhas swimming around them. Those are the kind of businesses you want. You want some business that, going back to my day, Johnny Weissmuller in a suit of armor could not make it across the moat.”
An “economic moat” (a term inspired by Buffett) is a competitive advantage that one company has in an industry. “In business, I look for economic castles protected by unbreachable moats” is another quote that has been attributed to Warren Buffett.
DEFINITION OF ‘ECONOMIC MOAT’
The competitive advantage that one company has over other companies in the same industry. This term was coined by renowned investor Warren Buffett.
INVESTOPEDIA EXPLAINS ‘ECONOMIC MOAT’
The wider the moat, the larger and more sustainable the competitive advantage.
Noember 1987, Orange Coast (Orange County, CA), “King of the Stock Market” by Elizabeth Pike, pg. 184, col. 2:
Buffett not only combined elements of each theory, but added some of his own. For example, he prefers a firm with a solid “franchise,” or marketing niche. “There are some businesses that have very large moats around them and they have crocodiles and sharks and piranhas swimming around them,” Buffett once wrote. “Those are the kind of businesses you want.”
The Good Guy of Wall Street
By Andrew Kilpatrick
New York, NY: Donald I. Fine
As he explained in Investing in Equity Markets, “There are some businesses that have very large moats around them and they have crocodiles and sharks and piranhas swimming around them. Those are the kind of businesses you want. You want some business that, going back to my day, Johnny Weissmuller in a suit of armor could not make it across the moat.”
Volume 149, Issues 1-4
In the lingo of investor Warren Buffett, these are companies with “moats” around them. They have managed to secure their markets against open warfare on the price front.
Credit Suisse - First Boston
October 21, 1997
Michael J. Mauboussin 212/325-3108
Thoughts on Valuation
By the way, Warren Buffett has a concept he calls the economic moat around the business. He says he looks for businesses that have economic moats that are as wide and as deep and that have as many alligators as possible. Further, he says he wants to find companies where the moat is getting wider.
Ask the Analyst
How Morningstar Measures Moats
Companies that have economic moats stand the test of time.
By Jeremy Lopez, CFA | 05-30-03 | 06:00 AM
At Morningstar, the concept of economic moats is a cornerstone of our stock-investment philosophy. Successful long-term investing involves more than just identifying solid businesses, or finding businesses that are growing rapidly, or buying cheap stocks. We believe that successful investing also involves evaluating whether a business will stand the test of time.
Castles and Moats
The concept of an economic moat can be traced back to legendary investor Warren Buffett, whose annual Berkshire shareholder letters over the years contain many references to him looking to invest in businesses with “economic castles protected by unbreachable ‘moats.’”
The Value Connection:
A Four-Step Market Screening Method to Match Good Companies with Good Stocks
By Marc H. Gerstein
Hoboken, NJ: John Wiley & Sons, Inc.
The amount of discount or premium associated with a particular star rating varies based on risk and Morningstar’s assessment of the company’s inherent competitive advantages (the size of its “economic moat”).
The Four Filters Invention of Warren Buffett and Charlie Munger
Two Friends Transformed Behavioral Finance
By Bud Labitan
Warren Buffett said in 1993 “the might of their brand names, the attributes of their products, and the strength of their distribution systems give them an enormous competitive advantage, setting up a protective moat around their economic castles. The average company, in contrast, does battle daily without any such means of protection.”
Economic Moat: A term coined by Warren Buffett referring to the competitive advantage a business has over its competitors. The moat acts as a barrier against other businesses trying to gain market share.
You Should Listen to Warren Buffett On Economic Moats
May 23, 2013
Warren Buffett once said, “In business, I look for economic castles protected by unbreachable moats.” The castle is a metaphor for a company, and the moat represents a strong competitive advantage. Naturally, a wider moat offers more protection in the long-term. The Oracle of Omaha has provided a great deal of wisdom over the years, but this piece of insight is more evident than ever.
The Motley Fool
Economic Moats: An Important Driver of Long-Term Returns
By James Yeo - April 3, 2014
The concept of an Economic Moat was initially formulated by the renowned investor Warren Buffett and it simply refers to the competitive advantages that a company enjoys over its rivals in the same industry.
Companies with economic moats can usually protect their profits from competitors as they have businesses with characteristics that prevent others from snatching away those profits.
New York City • Banking/Finance/Insurance • Wednesday, January 14, 2015 • Permalink