Wide Economic Moat

DEFINITION of 'Wide Economic Moat'

A type of sustainable competitive advantage that a business possesses that makes it difficult for rivals to wear down its market share and profit. The term is derived from the water filled moats that surrounded medieval castles. The wider the moat, the more difficult it would be for an invader to reach the castle.

BREAKING DOWN 'Wide Economic Moat'

Businesses that possess at least one factor of Porter's 5 forces model would possess a wide economic moat. For example, a business that holds an exclusive patent for the creation of a miracle drug would effectively keep potential competitors out of its business. Having few or no competitors would allow the company to continually generate high levels of profit. Legendary investor Warren Buffett is renowned for his philosophy of investing in businesses with wide economic moat.

RELATED TERMS
  1. Economic Moat

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

    A slight competitive advantage that one company enjoys over competing ...
  3. Soft Economic Moat

    A type of economic moat (or competitive advantage) that is based ...
  4. IRS Publication 570: Tax Guide ...

    A document published by the Internal Revenue Service (IRS) that ...
  5. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it ...
  6. Adverse Possession

    A principle of real estate law that allows a person who possesses ...
Related Articles
  1. Active Trading

    Economic Moats: A Successful Company's Best Defense

    Find out why some companies thrive while others flounder.
  2. 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.
  3. Retirement

    The Buffett Philosophy

    Find out which stocks one of the world's best investors is putting his faith in.
  4. Dictionary

    My Favorite Financial Term: Moat

    Kevin Carter, founder of Big Tree Capital, shares his favorite financial term.
  5. Mutual Funds & ETFs

    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.
  6. Stock Analysis

    Top Reasons to Invest in Google

    There's three main reasons Google stands to succeed for years to come.
  7. Active Trading

    Which Is Better: Dominance Or Innovation?

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

    3 Castles That Cost Less Than a NYC Apartment

    Did you know you can rent an entire ch√Ęteau, and that it might cost less than your New York pad?
  10. Markets

    Fundamental Analysis: Qualitative Factors - The Industry

    By Ben McClureEach industry has differences in terms of its customer base, market share among firms, industry-wide growth, competition, regulation and business cycles. Learning about how the ...
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 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 >>
  4. 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 >>
  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. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center