What is a business "moat" and why does it matter for investors?

A business moat refers to a company's sustainable competitive advantage that protects it from competitors—similar to a castle moat. These advantages might include strong brand recognition (like Apple), high switching costs (like Microsoft's software), network effects (like Visa's payment system), or unique assets (like Waste Management's landfills). For investors, companies with wide and growing moats typically maintain pricing power, defend market share during downturns, and generate consistent returns over time, often making them more resilient long-term investments.

What does "prioritizing long-term advantage over short-term earnings" actually mean?

This means a company is willing to sacrifice immediate profits to strengthen its competitive position. For example, Amazon spent years reinvesting nearly all its profits into building its logistics network and AWS cloud infrastructure instead of showing higher earnings. While this reduced short-term profitability, it created enormous barriers to entry that competitors struggle to overcome. Companies in this collection make similar strategic choices—spending on R&D, brand building, or infrastructure today to secure stronger market positions and potentially greater profits tomorrow.

How do these stocks typically perform during market downturns?

Companies with wide competitive moats often demonstrate greater resilience during economic downturns and market corrections. Their established market positions, pricing power, and customer loyalty typically provide more stable revenue streams when conditions deteriorate. While no stock is immune to market volatility, businesses with strong competitive advantages can often weather storms better than their peers, sometimes even gaining market share from weaker competitors during difficult times. This relative stability is why many investors consider these stocks as core holdings for long-term portfolios.

What are "network effects" mentioned in some company descriptions?

Network effects occur when a product or service becomes more valuable as more people use it. For example, Visa and Mastercard become more valuable to merchants as more consumers use their cards, and more valuable to consumers as more merchants accept them. Similarly, Microsoft's productivity software is more useful because so many people already use it, making collaboration easier. Network effects create powerful competitive advantages because new competitors face a chicken-and-egg problem: users won't join without an existing network, but you can't build a network without users. This makes companies with strong network effects particularly difficult to compete against.

14 handpicked stocks

Moat Wideners

These companies are building unbeatable competitive advantages that competitors simply can't match. Our analysts have carefully selected businesses that prioritize long-term market dominance over quick profits, creating exceptional durability and growth potential.

Han Tan | Market Analyst

Published on June 17

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

Microsoft Corporation

MSFT

Current price

$511.92

Its dominance in enterprise software and cloud computing creates exceptionally high switching costs and a powerful, self-reinforcing network effect.

Amazon.com Inc.

AMZN

Current price

$220.14

Its massive e-commerce and logistics infrastructure, paired with its leading cloud platform (AWS), establishes formidable and continuously expanding c...

Its massive e-commerce and logistics infrastructure, paired with its leading cloud platform (AWS), establishes formidable and continuously expanding competitive barriers.

Alphabet Inc (Google)

GOOGL

Current price

$243.69

Unmatched dominance in search and digital advertising is fueled by a vast, proprietary data advantage and continuous, heavy investment in artificial i...

Unmatched dominance in search and digital advertising is fueled by a vast, proprietary data advantage and continuous, heavy investment in artificial intelligence.

Apple, Inc.

AAPL

Current price

$257.58

Visa, Inc.

Current price

$346.40

MasterCard Inc.

Current price

$577.11

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12 Month Growth Potential

Use the growth calculator to see how much investing in these assets could return over one year, based on aggregated analyst sentiment provided by Refinitive Ltd.

If you invested across these assets:

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In 12 months it might be worth:

$1,000.00

+4.88%

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About This Group of Stocks

Our Expert Thinking

These companies are playing the long game, strategically reinvesting profits to strengthen their competitive advantages rather than maximizing short-term earnings. From proprietary technology to iconic brands and complex service networks, they're building business "moats" that get wider and deeper over time.

What You Need to Know

This collection focuses on resilient businesses capable of weathering economic uncertainty while maintaining pricing power. They typically have high barriers to entry, strong customer loyalty, or network effects that make them increasingly difficult to compete against as they grow, positioning them as core portfolio holdings.

Why These Stocks

Each company demonstrates disciplined capital allocation that reinforces its market leadership. In today's volatile economic landscape, these businesses aren't just defending their positions—they're actively gaining market share from weaker competitors while building foundations for tomorrow's success.

Group Performance Snapshot

4.95%

Average 12 Month Profit

On average, analysts expect assets in this group to grow 4.95% over the next year.

14 of 14

Stocks Rated Buy by Analysts

14 of 14 assets in this group are rated Buy by professional analysts.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🛡️

The Ultimate Defense Play

These companies don't just survive market downturns—they often emerge stronger. Their wide competitive moats provide protection during economic uncertainty while allowing them to capture market share from weaker rivals.

🏗️

Building Tomorrow's Giants Today

While others chase quarterly profits, these companies are investing in competitive advantages that could dominate their industries for decades. Their strategic vision often creates compounding growth that gets stronger over time.

💎

The Sleep-Well Portfolio Foundation

Institutional investors and seasoned market veterans favor these durable businesses for their core holdings. Their robust competitive advantages and strategic reinvestment deliver the reliability that forms the backbone of quality investment portfolios.

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