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Economic moat as a value investing principle should be such that - (i) the company which manages to create it is able to reap the benefits of such an advantage for a long time; (ii) it gives the company some cushion in times of temporary setbacks in business. There are several ways in which a company creates an economic moat that allows it to have a significant advantage over its competitors. A company that offers a product with similar attributes as that of its competitor, but at a lower cost, enjoys a powerful economic advantage. Strong distribution network is yet another form of economic moat which gives a company a strong competitive advantage. Economic moats are powerful and valuable assets to companies and are worth a lot when evaluating a company.
The wider the moat, the more easily the castle could be defended while a narrow moat did not provide strong enough protection against the enemy.
A clear understanding of the concept of economic moat and its effective application can prove to be extremely beneficial for investors and while there is nothing wrong in buying stocks on any other criteria (i.e.
While medieval moats are no longer a tool of warfare, in economics a moat is considered to serve as a defence against competition and investors may look into the width of the moat around a company's business to adopt their investment strategy.

Note that empirical evidence suggests that companies with strong economic moats are generally overvalued in terms of share price and usually trade with high Price to earnings multiples. Great management, technological advancement and popular products can be advantageous to any business but none of them in real sense is a structural advantage that can promise a long sustainable return for the company of its own. For example, the brand loyalty of Colgate and Bournvita (Cadbury), give the respective companies a lasting economic moat.
To him, the castle is the business, and the unbreachable moat is the competitive advantage one company has over others in the same sector, which makes it impossible for other firms to touch its market share. An economic moat can be a business model that is hard to replicate, a strong brand value that is tough to match, pricing power that can undercut rivals on low costs, high switching costs that involve a one-time expense which a buyer incurs to change from one product to another, or intellectual property such as product patents.
A company having a wide moat can prevent others in the same business from eating into its market share. The moat principle suggests that investors should choose companies that have leading market shares, have sustained these over a period and are more likely to stand the test of time. The absence of other listed peers within the same sector is not a strong enough moat for a company as it is not sustainable, unless the industry is fragmented and unorganised where there is little scope for the market leader to lose its position. Using the economic moat theory as a qualitative tool, ET Intelligence Group gives you eight well-moated companies from different sectors of Indian Inc.

OnMobile Global Moat : Business strategy - expansion in overseas markets to gain better synergies and implement customer-oriented applications. This has helped diversify the risk associated with falling profitability of Indian telecom companies. Nestle India Moat: Strong brands like Maggi (noodles and ketchup), Cerelac (baby foods), and Nescafe (retail coffee).
Reliance Industries Moat: India's largest private sector enterprise with businesses in energy and materials value chain.
Effect : * It is India's largest refiner with the world's biggest refinery complex at Jamnagar in Gujarat.

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