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Pretty sure "moat" is a term popularized by Warren Buffet himself to describe a company with some kind of inherent advantage over it's competitors. As in, when
by criley 14y ago
Pretty sure "moat" is a term popularized by Warren Buffet himself to describe a company with some kind of inherent advantage over it's competitors. As in, when a company with a moat succeeds, his competitors have a hard time entering that market and replicating that success because of the moat.
A moat protects your marketshare. A very large moat then would be, I guess (I'm not an investor or anything), a company with a large competitive advantage and a market share that would be very difficult to steal.
- txttran 14y agowhat about "rent capture" and "fiat risk"?
- pjschlic 14y agoRent capture: landlords collect rent on the house they own the right to. Similarly, lets say the government or any contracts grants some body special privileges, the money they earn on those privileges in excess of what they would have otherwise is a rent capture. EG: lawyers get more money because only they are allowed to do certain legal work. The rate they collect in excess of what someone unlicensed but qualified would charge is a rent capture (rent seeking activity?[0]). Fiat risk: inflation. [0] http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking
- wintersFright 14y agofiat (govt currency) risk is if you are keeping 100 million in a bank account and Bernanke keeps running the printer, then one day you will wake up and it will buy approx three eggs. So best to ensure you have physical wealth assets on hand that can't be conjured out of thin air. What about FDIC bank guarantees? Well sure the 100 million is guaranteed. It's purchasing power is not.
- chii 14y agoit sucks that purchasing power is lost for people without lots of money. It seems inherently an unfair system - if you stop producing value, your existing store of value diminishes thru no fault of your own.
- wintersFright 14y agothe trick is to realise that currency was not designed to be a store of value so don't use it as such. To paraphrase Silvio Gesell, an economist in favor of symbolic currency almost a century ago, "All the physical assets of the world are at the disposal of those who wish to save, so why should they make their savings in the form of money? Money was not made to be saved!" ie: you don't need to buy whole companies outright to avoid saving in currency.
- patrickk 14y agoA good example of a moat - and a company that Buffett has invested in - Coca Cola. They've invested enormous sums in marketing sugary syrup, a product with a sizable margin. Others produce sugary, fizzy water too, but there's only one Coca Cola and it's impossible to overcome in the marketplace.
- supercanuck 14y agoMoat = High Switching Barriers or Switching Costs. http://en.wikipedia.org/wiki/Switching_barriers http://en.wikipedia.org/wiki/Switching_barriers