Analyzing a Company’s Economic Moat

An economic moat protects a company from being over-run by competitors. It is not a guarantee against competitors capturing market share, but its strength can slow them down. A strong economic moat today does not mean it will last forever. In the early days of computers, IBM had a lock on most of the business. While it is still a strong company, the industry has evolved and is full of competitors. Great companies adapt to changes in technology and the market.

An economic moat is important in determining the company’s intrinsic value, because it gives you some idea of the potential long-term success of the company. As a long-term investor, you are looking for companies that can deliver value to stockholders ...

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