MOAT PRINCIPLE

MOAT PRINCIPLE

Market gyrations, price-value discrepancies, and risks of overconfidence warrant exercising extraordinary caution in selecting an investment.

In focusing on the business, value investors ascertain whether the business itself is substantially insulated from adversity.

Value investors avoid businesses threatened by product market downturns, recessions, competitive onslaughts, and technology shifts.

The business itself must be fortified by a moat, a defensive barrier to these ill effects such as arise from brand-name ubiquity, staple products, market strength, and adequate research and development resources.

Franchise value is exhibited by high, sustainable returns on equity (ROE).

Also read: 10 TENETS OF VALUE INVESTING

1. MR. MARKET PRINCIPLE
2. BUSINESS ANALYST PRINCIPLE
3. REASONABLE PRICE PRINCIPLE
4. PATSY PRINCIPLE
5. CIRCLE OF COMPETENCE PRINCIPLE ****
6. MOAT PRINCIPLE
7. MARGIN OF SAFETY PRINCIPLE ****
8. IN-LAW PRINCIPLE
9. ELITISM PRINCIPLE
10. OWNER PRINCIPLE