Spotlight Moats Not All Moats Are Created Equal 32 Moats Stake Their Claim Seeking competitive advantages and attractive valuations leads to smart investing. MOATS Michael Holt, Andrew Lane, and Hari Narayan In a free-market economy, capital seeks the areas of highest return. Whenever a company develops a profitable product or service, it doesn't take long before competitive forces drive down its economic profits. Only companies with an economic moat-a sustainable competitive advantage that allows a firm to earn above-average returns on capital over a long period of time-are able to hold competitors at bay. Warren Buffett devised the economic moat concept. Morningstar has made it the foundation of its stock-investing philosophy and methodology. To us, buying a share of a stock means buying a small piece of a business, global.morningstar.com/Morningstarmagazine 27http://global.morningstar.com/Morningstarmagazine