Investment Ideas – Economic Moats

Another post in the series of Investment Ideas. Be sure to check out earlier posts on Family Owned Businesses & Great Capital Allocators as a method of screening and finding good investment opportunities.

Most investors have heard Warren Buffett talk about economic moats of businesses. To jog some memory, here’s a quote from Berkshire’s 2000 annual meeting:

“So we think in terms of that moat and the ability to keep its width and its impossibility of being crossed as the primary criterion of a great business. And we tell our managers we want the moat widened every year. That doesn’t necessarily mean the profit will be more this year than it was last year because it won’t be sometimes. However, if the moat is widened every year, the business will do very well. When we see a moat that’s tenuous in any way — it’s just too risky. We don’t know how to evaluate that. And, therefore, we leave it alone. We think that all of our businesses — or virtually all of our businesses — have pretty darned good moats.”

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