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. Economic Moat

    The competitive advantage that one company has over other companies ...
  2. Soft Economic Moat

    A type of economic moat (or competitive advantage) that is based ...
  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. Monopolistic Competition

    Characterizes an industry in which many firms market products ...
Related Articles
  1. Active Trading

    Economic Moats: A Successful Company's Best Defense

    Find out why some companies thrive while others flounder.
  2. Stock Analysis

    A Look at Economic Moats - Part 1

    Part one of a two part piece on the Buffett- coined concept of "economic moat".
  3. Investing

    Revealed: How We Uncovered The "World's Greatest Businesses"

    <p>Warren Buffett has made a career out of honing in on the world's best investments.</p> <p>Through his holding company, Berkshire Hathaway...
  4. Investing

    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. Investing

    A Best-In-Class Stock Sporting A 5.7% Yield

    If I asked you to name one of America's greatest companies, then I would undoubtedly receive a wide range of responses. Many might say Apple (Nasdaq:AAPL) for the way it transformed our daily ...
  6. Investing

    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.
  7. Professionals

    Advertising, Crocodiles And Moats

    Memorable advertising is a brick in the fortress that keeps competitors at bay.
  8. Investing

    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?
  9. Active Trading

    Which Is Better: Dominance Or Innovation?

    Find out how to assess and evaluate both these values in the market and your portfolio.
  10. Economics

    What's a Competitive Advantage?

    A competitive advantage is an advantage a firm has over its competitors.
RELATED FAQS
  1. 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 >>
  2. How do I determine my company's competitive advantage?

    Find out how to determine if your company has a competitive advantage and, if so, learn how to figure out how to make it ... Read Answer >>
  3. Which industries tend to have the greatest EBITDA margins?

    Find out what industries have the highest EBITDA margins; learn what factors influence EBITDA margin and how EBITDA margin ... Read Answer >>
  4. What factors influence competition in microeconomics?

    Find out what influences competition in microeconomics and how perfect competition, monopoly and oligopoly vary in their ... Read Answer >>
  5. What is a good operating margin for a business?

    Read about what it means to have a good operating margin and why that answer depends heavily on competitive and historical ... Read Answer >>
  6. Is it possible for a country to have a comparative advantage in everything?

    Learn whether one country can have a comparative advantage in everything and what the difference between comparative advantage ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center