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Friday, 16th October 2015

Business Moats

Written by George Traganidas Topics: Stock Investing, Wealth Building

Moat

One of the tasks of an analyst who is evaluating a business is to think about the moat of the business. But what is a moat? A simple way to think about moats is to imagine that the business is a castle and the moat it what surrounds the business and keeps other businesses at bay. Every business has a moat, but the difference is the size and the durability. Some businesses have narrow moats and other have wide ones. Some business moats are shrinking as time goes by, whereas others are widening. Ideally an analyst wants to find a business with a wide moat that keeps widening. One of the characteristics of the capitalist system is that a profitable business will attract more and more competitors and these competitors will test your moat repeatedly. Thus, the more successful a business is the harder it is to keep being successful and widen its moat. […]

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