A moat is usually defined as a deep ditch dug around an important area like castle, building etc to provide the area with some preliminary line of defence. In the same light, you could see economic moat as some sort of line of defence around a company with the objective of protecting the business against erosion of its profits and market share. Economic moat is a term popularised by Warren Buffett and it has been largely used to describe companies which have a long term key competitive advantage over the other competitors in the same industry. It was believed that this is one of the most important things he looked into when deciding to invest in a particular company.
So how do you know if a company has any economic moat? And what kinds of economic moat are there?
Well, there are some areas you could look into to determine...