Similar to the medieval castles of Northern Europe, where an already near-impenetrable fort was encapsulated with an additional layer of security (a wide water and alligator-filled moat), having a company with an added layer of protection from the return-killing power of competition is a very valuable asset indeed.
With competition representing one of the key factors which can erode profitability over time, insulated companies with little bottom line exposure over a long period of time could be considered prime candidates off the top.
Companies like Walt Disney Co. (NYSE:DIS) stand as shining examples of companies which have not only survived but thrived over decades; maintaining a lead in one’s industry is perhaps hardest to do as times evolve and technology continues to disrupt the traditional means by which companies deliver their products to market.
The timeless “forever” companies Buffett and others talk about are often those with the biggest moats – an excellent starting point for investors looking to build a long-term portfolio.
Invest wisely, my friends.