Pat Dorsey: Hi, I am Pat Dorsey, director of equity research at Morningstar. At Morningstar, thinking about economic moats, or structural competitive advantages, is central to how we do equity research, so I thought it might be worth spending a few minutes and just giving you some basic background on what we mean when we say economic moat, and just what the kinds of moats are that we look for in businesses.
So, when we say economic moat, you might think of the old moat around a castle that protected it from barbarians who want to plunder its treasure. Well, it's really the same concept with a business. All businesses, profitable ones anyways, attract competition, and economic moats basically protect them from the competition that wants to move into their profit pool.
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Pat Dorsey does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.