What Is A Moat? Warren Buffett's Favorite Term Explained | Exploring Markets

What Is A Moat? Warren Buffett's Favorite Term Explained

Pat Dorsey has been watching financial markets for his entire life. He spent 10+ years at Morningstar. Today, he runs his own firm dedicated to value investing and finding companies with strong moats. What is a moat? Well, for starters it is Warren Buffett's favorite term.

A moat, in its simplest form, is a company that has a competitive advantage inherent only to that company. This advantage differentiates them from any other competitor. Coca Cola, for example, has a massive moat. The taste and secret ingredients of Coca Cola create a giant moat around its brand and product. It truly cannot be dethroned until someone makes something better and steals its millions of loyal customers... So far that has been nearly impossible.

That is a very simple explanation of a moat. But now take some time to watch this talk of Pat Dorsey at Google. He breaks down everything behind a moat, what it means, and why you should invest in companies with big moats.