What does it mean when a stock has a wide moat?
A wide economic moat is a type of sustainable competitive advantage possessed by a business that makes it difficult for rivals to wear down its market share. The term economic moat was made popular by the investor Warren Buffett and is derived from the water-filled moats that surrounded medieval castles.
What does wide and narrow moat mean?
A competitive advantage, or a narrow economic moat, refers to any advantage that currently enables a company to earn stronger margins relative to its competitors. A wide economic moat, on the other hand, offers a sustainable competitive advantage over the long haul.
What does size of moat mean?
Moat Size. The measure of the competitive barrier, if any, that gives a company an advantage over its rivals and allows it to generate above-average returns on invested capital.
Is moat ETF a good investment?
It has a relatively high expense ratio of 0.75% but has rewarded investors with a strong performance over an extended period with a 10-year return of 13.47%, a five-year return of 12.54% and a three-year return of 14.7%. The ETN also has an impressive YTD return of 6.63%.
How do you determine if a company has a moat?
Margins (gross, operating, and net profit margins) are also something you should look at to determine whether or not your company is maintaining a strong economic moat. Ideally, you’d want stable or growing margins over the last 10 years.
Is narrow moat better than wide moat?
Wide economic moats, on the other hand, 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.
How wide should a moat be?
“The canals must be deep and wide,” Meendering says: Try eight feet deep and 20 to 40 feet wide. Consider geology and its potential effects on sedimentation. Plan a route across; Bourtange has five wooden drawbridges, but they’re too heavy and dangerous to pull up.
What is meant by narrow moat?
A narrow economic moat refers to a company with only a slim advantage over its competitors in a given market or industry segment. Narrow moats exist in highly competitive sectors that have low barriers to entry and only a small ability to protect intellectual property.
What are the different types of moats?
There are five types of moats:
- Low-cost production;
- High switching costs;
- Network effects;
- Intangible assets;
- Efficient scale.
What are the advantages of a moat?
Some of the advantages are as follows: Companies with economic moat are more likely to withstand their competitors and maintain market share to remain successful. It helps a company to maintain the desired profitability even in situations of depression.
What are wide moat stocks?
Moat stocks are those that have some sort of a sustained advantage over their competitors. Wide moat means that the degree of that advantage is higher. Hence, intuitively, wide moat stocks would outperform broader markets in the long run, which they have, as the graph suggests.
What is narrow moat?
What is Narrow Moat. A narrow moat is 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…
What is the plural of moat?
moat (plural moats) A deep, wide defensive ditch, normally filled with water, surrounding a fortified habitation. (business, figuratively) An aspect of a business which makes it more “defensible” from competitors, either because of the nature of its products, services, franchise or other reason.