Moat: Link Between Market Expectations And Competitive Strategy

Warren Buffett consistently emphasizes that he wants to buy businesses with prospects for sustainable value creation. He suggests that buying a business is like buying a castle surrounded by a moat and that he wants the moat to be deep and wide to fend off all competition. Economic moats are almost never stable. Because of competition, they are getting a little bit wider or narrower every day. A recent report, Measuring the Moat, by Michael J. Mauboussin and Dan Callahan of Credit Suisse Group AG (NYSE:CS), develops a systematic framework to determine the size of a company’s moat.

Moat: Dimension of sustainable value creation

Corporate managers...