Evaluate five moat sources: intangible assets, switching costs, network effect, cost advantage, regulatory barriers.
References from Buffett's 60 years of letters
“Coca-Cola's brand is its most valuable asset. Consumers worldwide reach for Coke regardless of price, giving it extraordinary pricing power.”
“In insurance, once a customer has coverage, switching to another provider is cumbersome. This gives Berkshire Hathaway's insurance operations a significant advantage.”
“Some businesses benefit from network effects—the more users they have, the more valuable they become. This creates a powerful barrier to entry.”
“Nebraska Furniture Mart's ability to sell at prices competitors can't match comes from relentless cost control and massive volume.”
“Our regulated utility businesses benefit from government-granted monopolies. Competition is limited by the nature of the industry.”
🎯 Core Principle
"The key economic moat — the awesome waters around the castle — is the decisive factor that allows a company to maintain its competitive advantage."
— Warren Buffett, 1986 Letter
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