Focus on the companies with Economic Moats

Economic moats are long-term competitive advantages that allow companies to earn oversized profits over time.  These are the companies you should focus your attention on.

There are 4 main types of economic moats:

• Low-cost producer or Economies of Scale
• High switching costs
• Network effect
• Intangible assets

The more types of economic moats a company has, the better.

The longer a firm can sustain its competitive advantage, the wider its economic moat.


The Bottom Line

• While having these four types of of moats, or competitive advantages, as guidelines is helpful, there is still a lot of art to determining whether a firm has a moat. 
• At the heart of it, the harder it is for a firm's advantage to be imitated, the more likely it is to have a barrier to entry in its industry and a defensible source of profit.