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The Equitymaster Research Digest

The Universe to Pick Companies with Widening Moats
Nov 8, 2016

As staunch believers in value investing, the key aspect that we look for companies we recommend is moat.

This is what Warren Buffett has to say about moat:

The most important thing to me is figuring out how big a moat there is around the business. What I love, of course, is a big castle and a big moat with piranhas and crocodiles.

But how do you define a moat? High entry barriers, low cost of operations, network advantages, and strong brand and so on are the some of the terms that you will most likely hear in response.

While these factors mostly accompany moats, the converse may not be true. Consider these examples:

High entry barrier- Container Corporation of India Ltd

Low cost - Cairn India Ltd

Network advantages - Info Edge (India) Ltd, Flipkart

Brand - Tata Group, Xerox, Kodak, VIP

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