Definition of Moat

What does the term "moat" mean when it comes to companies and the Warren Buffett method of investing? What is meant by the word "moat"?

When Warren Buffett refers to the "moat" that is around companies, he is referring to their competitive advantage.

For instance, Apple has a moat when it comes to their market share, brand identity, various patents, tie-ins with their multiple products, etc.

Apple has a very loyal customer base that usually uses a multitude of Apple products, ranging from the iPhone to the iMac to Apple Music, etc.

Apple also has a very large reserve of cash, so they can spend more than any other company on earth to maintain their competitive advantage.

This is one of the reasons why Berkshire Hathaway invested so heavily in Apple over the last number of years - their "moat" is nearly impenetrable.

It's hard to imagine any company mounting a serious threat to Apple's market share.

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On the other hand, a company that sells books online has no "moat", as they have no competitive advantage.

In fact, they are very disadvantaged, as they are competing with Amazon.com, and others.

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Davemanuel.com Articles That Mention Moat:

Berkshire Hathaway Adds Another 75 Million Apple Shares To Their Already Massive Holding

Report: 80 Million US Households Now Have Amazon Prime Memberships

Warren Buffett: Berkshire Hathaway Might Start Paying Dividends To Shareholders

Amazon.com Launching A Stand-Alone Video Streaming Service To Compete With Netflix, Hulu