Narrow Moat

Loading the player...

DEFINITION of 'Narrow Moat'

A slight competitive advantage that one company enjoys over competing firms operating in the same or similar type of industry. A narrow moat is still an advantage for a company, but it is one that only provides a limited amount of economic benefit and will typically last for only a relatively short period of time before competition marginalizes its importance.

BREAKING DOWN 'Narrow Moat'

The phrase "economic moat" was coined by legendary investor Warren Buffett. This phrase has since been refined to differentiate between "wide moats" and "narrow moats". Wide economic moats offer substantial economic benefits and are expected to endure for a prolonged period of time, while narrow moats offer more modest economic benefits and typically last for a shorter period of time.

RELATED TERMS
  1. Soft Economic Moat

    A type of economic moat (or competitive advantage) that is based ...
  2. Economic Moat

    The competitive advantage that one company has over other companies ...
  3. Wide Economic Moat

    A type of sustainable competitive advantage that a business possesses ...
  4. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it ...
  5. Dog Eat Dog

    Intense competition in a market. Dog eat dog competition most ...
  6. National Diamond

    A theory of competitive advantage developed by Harvard Business ...
Related Articles
  1. Trading

    Economic Moats: A Successful Company's Best Defense

    Find out why some companies thrive while others flounder.
  2. Insights

    Buffett's Moat: Is Apple's Competitive Advantage Sustainable? (AAPL)

    Examine the width and sustainability of Apple's economic moat. Find out how brand loyalty, economies of scale and network effect contribute to profitability.
  3. Insights

    Buffett's Moat: Is Intel's Competitive Advantage Sustainable? (INTC)

    Examine Intel's economic moat to assess its width and sustainability. Can Intel's competitive advantage keep returns above the cost of capital?
  4. Insights

    Buffett's Moat: How Sustainable is Google's Competitive Advantage? (GOOGL)

    Learn about the sources and sustainability of Google's competitive advantage by examining Warren Buffett's concept of an economic moat.
  5. ETFs & Mutual Funds

    High Quality Stocks: Why Now Might Be the Time for Them

    The market has rallied in a big way, but many investors are still seeking a flight to quality. These three ETFs offer quality in different ways.
  6. Insights

    Warren Buffett's Moat: How Sustainable is Costco's Competitive Advantage? (COST)

    Find out how Costco has leveraged its cost model and brand equity into a sustainable economic moat, which protects investors and customers.
  7. ETFs & Mutual Funds

    3 ETFs that Replicate Buffett's Investment Strategy (MOAT, XLF)

    Discover three exchange-traded funds (ETFs) that investors seeking to emulate the investment strategies of Warren Buffett may wish to consider.
  8. Investing

    My Favorite Financial Term: Moat

    Kevin Carter, founder of Big Tree Capital, shares his favorite financial term.
  9. Investing

    Top Reasons to Invest in Google

    There's three main reasons Google stands to succeed for years to come.
  10. Markets

    Oil Glut: Find the Opportunities, Jump In

    The recent drop is creating opportunity for larger producers in the form of bankruptcies for smaller firms. Is opportunity also present for the individual investor?
RELATED FAQS
  1. What is an economic moat?

    The term economic moat, coined and popularized by Warren Buffett, refers to a business' ability to maintain competitive advantages ... Read Answer >>
  2. What factors make the drug sector good for value investing?

    Discover what makes the drugs sector good for value investing. The perfect ingredient for value investors is to find undervalued ... Read Answer >>
  3. Why should value investors consider the insurance sector?

    Discover why value investors should consider the insurance sector. Value investors look for extremes in valuation and sentiment ... Read Answer >>
  4. Why does Warren Buffett largely avoid investing in the technology sector?

    Learn about why Warren Buffett has traditionally avoided investing in technology companies. Read about his value investing ... Read Answer >>
  5. Why did Warren Buffett invest heavily in Coca-Cola (KO) in the late 1980s?

    Discover why Warren Buffett found Coca-Cola an attractive investment in 1987. One criteria of a Buffett stock pick is a moat ... Read Answer >>
  6. Should I buy and hold a cyclical stock for long-term gains?

    Discover whether cyclical stocks are a good option for long-term investors. Cyclical stocks tend to be highly leveraged to ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center