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Stock Strategist

Crossing These Moats Will Cost You

An economic moat is great for these businesses, but it won't protect investors if they overpay for the stock.

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At Morningstar, we've long espoused the notion that stock investors should think like business owners. After all, to buy a share of stock is to take a stake in a business.

Imagine if the owners of the jewelry store down the street knocked on your door and invited you to buy in to their fast-growing operations. As a potential business partner, you'd naturally want a few questions answered before you dig out the checkbook: What sets you apart from the jewelry store across the street? Are your profits stronger? Can you charge more for your wedding rings, or is your merchandise constantly on sale? What keeps your customers coming back?

Jason Stipp does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.