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Moat Investing

Video Transcript

Moat Investing, Powered by Morningstar


VO: Moat, a term first coined by Warren Buffet.


What is an economic moat?


VO: A company’s ability to maintain competitive advantages and fend off its competition in order to protect its long-term profits and market share. Moat investing is based on a simple concept: invest in companies with sustainable competitive advantages trading at attractive valuations.


Morningstar turns the moat investing philosophy into an actionable investment strategy.


VO: Morningstar has identified 5 sources of competitive advantages (or moats):


Switching costs: Whether in time or money, the expenses that a customer would incur to change from one producer/provider to another


Intangible assets: Brands, patents, and regulatory licenses that block competition and/or allow companies to charge more.


Network effect: When the value of a service grows as more people use a network


Cost advantage: Allows firms to sell at the same prices as competition and gather excess profit and/or have the option to undercut competition


Efficient scale: When a company serves a market limited in size, new competitors may not have an incentive to enter.


In order to avoid overpaying for moat companies, Morningstar assigns each company a fair value based on its projected future cash flows and assesses its current price against this fair value. This forward-looking valuation approach allows long-term investors to look beyond a company’s current price and potential noise in the market.


Leverage Morningstar’s forward-looking moat investment philosophy across global equity markets through VanEck’s Moat Investing strategy.


VanEck’s moat investing strategy offers: moat companies, attractive valuations, Morningstar’s Equity Research.

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