An easy-to-browse ready reckoner for everyone, with lots of easy tips
CREATE WEALTH BY INVESTING IN COMPANIES WITH WIDE MULTIPLE MOATS
1. Companies with wide and multiple economic moats are likely to survive over long periods, and earn consistently high profits, besides tiding over difficult economic environments and giving them an extra edge to predict future performance. 2. In modern economics, competition gradually erodes any advantages enjoyed by a company, as new and existing players always try to duplicate operations or discover better operating methods. 3. This is why it is important for a company to sustain its economic moat for long, by having a wide moat, without which competitors will steal its market share and, hence, profits.
4. Over time, consumer tastes, trends and technologies evolve because of which a single moat can become narrow or even disappear altogether.
5. Some of the multiple moats created by successful companies for long-term survival and leadership are: a) Lower cost of production b) Higher switching cost to customers c) Stronger brand identity d) Superior technology e) Stringent entry barriers like patents and licenses. 6. Such companies stand out for decades, while others wilt away after a few prosperous years, because they are also always on the lookout for any external threats that can cause a breach in their carefully built moats. 7. Investors should, therefore, look at the company's management quality towards constant innovations for staying ahead of its rivals. 8. Also, the shares of companies with wide and multiple moats are often rewarded with high valuations, so investors should make sure that they do not overpay, as the benefits arising from these moats may be priced in.
2. In modern economics, competition gradually erodes any advantages enjoyed by a company, as new and existing players always try to duplicate operations or discover better operating methods.
3. This is why it is important for a company to sustain its economic moat for long, by having a wide moat, without which competitors will steal its market share and, hence, profits.
a) Lower cost of production
b) Higher switching cost to customers
c) Stronger brand identity
d) Superior technology
e) Stringent entry barriers like patents and licenses.
6. Such companies stand out for decades, while others wilt away after a few prosperous years, because they are also always on the lookout for any external threats that can cause a breach in their carefully built moats.
7. Investors should, therefore, look at the company's management quality towards constant innovations for staying ahead of its rivals.
8. Also, the shares of companies with wide and multiple moats are often rewarded with high valuations, so investors should make sure that they do not overpay, as the benefits arising from these moats may be priced in.