Great breakdown of how to spot moats — really hits the essentials.
I find the hardest part is turning these qualitative insights into a repeatable process. That’s why I built a simple spreadsheet checklist that breaks down each moat factor into measurable criteria — things like ROIC thresholds, gross margin targets, and customer stickiness proxies.
It’s a no-nonsense tool DIY investors can use to evaluate stocks without getting overwhelmed by hype. Happy to share it if anyone’s interested — it’s helped me cut through the noise and focus on real competitive advantages.
Would love to hear how others measure moat strength in their investing.
All competitive advantageous factors boiled down to a single soup bowl of MoAT: ROA.
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The more parameters you assess, the more complications and errors you will produce and the more you will be confused and don't know what to do, this ok, that not good, but another one looks excellent but the other one look awful, and give up at the end: Moat is Inconclusive.
Moat on AssetTotal (MoAT Competitive Advantage) Ratio
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Basic Concepts :
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i.
“MoAT Grows The Growth”
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The Mother of Growth is the MoAT.
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ii.
The four sources of structural competitive advantage are intangible assets, customer switching costs, the network effect, and cost advantages.
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If you can find a company with solid returns on capital and one of these characteristics, you’ve likely found a company with a moat.
— Pat Dorsey
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iii.
Analysis:
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Network Effect is manifested in the Asset Turnover Ratio (Rev/Total Assets)
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Intangible Assets & Customer Switching Cost are manifested in the 1st Level Profit Efficiency Yield, namely Gross Profit Yield from Revenue (GP/Rev).
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Company Operational Cost Advantage is manifested in the 2nd Level Profit Efficiency Yield, namely The Quality of Gross Profit, i.e. Net Profit Yield from Gross Profit (NP/GP).
Very broadly speaking, a nonfinancial company that can consistently generate an ROA of 7 percent or so likely has some kind of competitive advantage over its peers.
— Pat Dorsey, Author of The little book that builds wealth
Nice Infografic … Just pay attention to the description under “Intangibles”… there is a mistake. Bye
Great breakdown of how to spot moats — really hits the essentials.
I find the hardest part is turning these qualitative insights into a repeatable process. That’s why I built a simple spreadsheet checklist that breaks down each moat factor into measurable criteria — things like ROIC thresholds, gross margin targets, and customer stickiness proxies.
It’s a no-nonsense tool DIY investors can use to evaluate stocks without getting overwhelmed by hype. Happy to share it if anyone’s interested — it’s helped me cut through the noise and focus on real competitive advantages.
Would love to hear how others measure moat strength in their investing.
I like Adobe, what about you
Indeed, I do have a small position.
All competitive advantageous factors boiled down to a single soup bowl of MoAT: ROA.
.
The more parameters you assess, the more complications and errors you will produce and the more you will be confused and don't know what to do, this ok, that not good, but another one looks excellent but the other one look awful, and give up at the end: Moat is Inconclusive.
Moat on AssetTotal (MoAT Competitive Advantage) Ratio
.
Basic Concepts :
.
i.
“MoAT Grows The Growth”
.
The Mother of Growth is the MoAT.
.
ii.
The four sources of structural competitive advantage are intangible assets, customer switching costs, the network effect, and cost advantages.
.
If you can find a company with solid returns on capital and one of these characteristics, you’ve likely found a company with a moat.
— Pat Dorsey
.
iii.
Analysis:
.
Network Effect is manifested in the Asset Turnover Ratio (Rev/Total Assets)
.
Intangible Assets & Customer Switching Cost are manifested in the 1st Level Profit Efficiency Yield, namely Gross Profit Yield from Revenue (GP/Rev).
.
Company Operational Cost Advantage is manifested in the 2nd Level Profit Efficiency Yield, namely The Quality of Gross Profit, i.e. Net Profit Yield from Gross Profit (NP/GP).
.
MoAT
= Synergized Structural Competitive Advantage
= Network Effect × (Intangible Assets & Customer Switching Cost) × Company Operational Cost Advantage
= Asset Turnover Ratio × Gross Profit Yield from Revenue × Net Profit Yield from Gross Profit
= Rev/Total Assets × GP/Rev × NP/GP
= GPA × NP/GP
= NP/Total Assets
= ROA
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Gross Profitability (GPA)
= Mother of Net Profitability (ROA)
= Mother of MoAT
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NP/GP
= Quality of Gross Profit (in generating net profit)
= Father of Net Profitability (ROA)
= Father of MoAT
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iv.
In short,
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Structural Competitive Advantage
= MoAT
= Profitability
= Productivity
= Earning Power
= ROA
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v.
“All new projects should return at least 20% on total assets.”
— Henry Singleton
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Warren Buffett once said: “Henry Singleton of Teledyne has the best operating and capital deployment record in American business.”
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Reference:
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25iq. com/2014/11/08/a-dozen-things-ive-learned-from-henry-singleton-about-value-investing-venture-capital/
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vi.
Very broadly speaking, a nonfinancial company that can consistently generate an ROA of 7 percent or so likely has some kind of competitive advantage over its peers.
— Pat Dorsey, Author of The little book that builds wealth