Periodically, it’s important to review the basics of our investment philosophy, both for investors who are new to Morningstar and for long-time followers who could use a refresher. We use a particular vocabulary at Morningstar, and in this article we’ll explain what we mean by economic moats, moat trends, stewardship, and so on.

Economic Moats

A company with a very profitable business is like a castle that is constantly under attack by competitors. Without a strong defense, competitors will soon imitate the company’s products, charge lower prices, steal market share, and erode profit margins to the point where the business is merely average, at best.