How does Moat help in evaluating stocks?
In the context of the stock market, a moat refers to a company’s competitive advantage that makes it difficult for its competitors to gain market share or compete with it effectively. It is a metaphorical reference to the medieval castle moat, which made it challenging for enemies to breach the castle walls.
A company with a wide moat has a sustainable competitive advantage that can help it maintain or increase its market share and profitability over the long term. This competitive advantage can be achieved through various means such as strong brand recognition, high switching costs for customers, a large distribution network, proprietary technology or intellectual property, economies of scale, or government regulation.