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Moat is a ditch around the castle .It is filled with water that makes it difficult to attack for the enemies to attack the castle. The Concept of the Moat in Investing was propounded by Warren Buffet himself. Warren Buffet advises finding stocks with strong Economic Moats. If a stock is equipped with strong Moats, it withstands the attack from the Market Forces. Such stocks tend to withstand the test of time and grow in the future. Several times in his career, Buffet’s ideology is  investing only in such companies with strong Economic Moats. Basically the idea is that, the Company with strong Economic Moats will be like castles and they cannot be easily shaken by the variable factors that influence the market. The Economic Moats that these companies have will serve as their first line of defense during hard market condtions. The Economic Moat suggested by Warren Buffet can be briefly seen as 

  1. The Company will be a monopoly company or a Market Leader

  2. The Company has operates in a sector that has distinct competitive advantage

  3.  The Company will have huge Cash Flow and very less Debt

  4.  The Company will enjoy such supremacy in sales and pricing over other companies in the sector

  5.  The Company generates huge profits repeatedly over a long time period

  6. The Company enjoys rich public trust and brand value

For an Example, the Companies with stong Moat in India can be Asian Paints and HDFC. These companies are mentioned for illustration only and they are not Stock Recommendations.

Photo by Colin Watts on Unsplash