Finding Firms with an Edge (Moat)

Morningstar's characteristics of identifying the moat of a company - by Pat Dorsey, Director of Stock Analysis, Morningstar.

First,
- Look at the numbers
Return On Invested Capital (ROIC) must exceed Cost Of Capital.

If this is true, then look for one of the following four characteristics which will enable the business to earn the high ROIC in future.
- Structural Characteristics
1. Intangible Asset (like Patent)
2. Low Cost Producer
3. Customer Switching Cost e.g: Oracle
4. Network Effect. e.g: eBay

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