What Is an Economic Moat? The Five Types, and Who Has One
The short answer. An economic moat is a structural advantage that lets a company keep earning high returns while competitors try to take them away — a brand people insist on, a network that gets more useful as it grows, switching costs, a cost base nobody can match, or a licence others cannot get. We score it 0–100 from margins, returns on equity, scale and leverage. As of 27 July 2026 the widest-moat companies we cover are led by 6857.T.
The term comes from Warren Buffett, who has used the castle-and-moat image for decades to describe the only thing that makes a good business stay good. High profits attract competition; that is what profits are for. A moat is whatever stops the competition from arriving.
What are the five kinds of moat?
| Moat | What it is | Recognise it by |
|---|---|---|
| Intangible assets | Brands, patents, regulatory licences | Customers pay more for a functionally identical product |
| Switching costs | Leaving is expensive, slow or risky | Customers complain but do not leave |
| Network effects | Each user makes the product better for the others | The second-place competitor is far behind, not slightly |
| Cost advantage | Scale, location or process nobody can copy | Consistently higher margins in a commodity industry |
| Efficient scale | The market only supports one or two players | Nobody new has entered in decades |
Which companies have the widest moats?
Our moat score is derived, not hand-assigned: gross and net margin, return on equity, scale, leverage and the durability of revenue growth, clamped so no automatically-derived score can look more certain than it is.
| Company | Moat | Rating | To fair value | Sector |
|---|---|---|---|---|
| 6857.T Advantest | 95 | 53 | -31.4% | Technology |
| NVO Novo Nordisk A/S | 95 | 94 | +121.3% | Healthcare |
| 2330.TW TSMC | 95 | 76 | +20.7% | Technology |
| ATEYY Advantest Corporation | 95 | 52 | -33.6% | Technology |
| LRCX Lam Research | 95 | 46 | -33.3% | Technology |
| ASML ASML Holding (ADR) | 95 | 53 | -28.5% | Technology |
| FTNT Fortinet Inc. | 95 | 52 | -34.8% | Technology |
| ANET Arista Networks | 95 | 47 | -35.4% | Technology |
| 000660.KS SK Hynix | 95 | 58 | n/a | Technology |
| ASML.AS ASML Holding | 95 | 50 | -38.2% | Technology |
| 0388.HK Hong Kong Exchanges | 95 | 87 | +43.4% | Financials |
| PME.AX Pro Medicus Limited | 95 | 51 | -45.8% | Healthcare |
| 688111.SS Beijing Kingsoft Office | 95 | 81 | +32.5% | Technology |
| NOVO-B.CO Novo Nordisk | 95 | 95 | +121.1% | Healthcare |
| KLAC KLA Corp. | 94 | 48 | -55.9% | Technology |
Does a wide moat make a stock a good investment?
No, and this is the mistake the concept invites. A moat tells you the business will probably still be earning well in ten years. It says nothing about the price you are being asked to pay for that. The great destroyer of returns in quality investing is buying a genuinely excellent company at a price that already assumes excellence forever.
What this cannot tell you
- Whether the moat is widening or narrowing. Our score is a snapshot from the last reported figures.
- Anything about a young company. A five-year-old business has not yet had to defend anything.
- Whether the price is sensible. Check the fair value column, and then check our workings.
Educational information, not financial advice. Every figure on this page is read from the source filings when the page loads rather than written into the article, so what you are reading is today's data and not a snapshot of the day it was published.
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