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Morningstar Publishes New Book, Why Moats Matter: The Morningstar Approach to Stock Investing

Morningstar Editors 24 July, 2014 | 17:35

CHICAGO, July 21, 2014—Identifying “economic moats,” or structural barriers that protect companies from competition, is the cornerstone of Morningstar’s equity analysis. Similar to the way castles are protected by moats, companies with economic moats are great businesses that can fend off competition and earn high returns on capital for many years. Morningstar’s new book, Why Moats Matter: The Morningstar Approach to Stock Investing (Wiley: ISBN: 978-1-118-76023-9), helps investors find superior businesses and determine when to buy them to maximize returns over the long term.

Why Moats Matter outlines the basic idea of economic moats, a concept pioneered by Warren Buffett, and gives investors a fundamentals-based framework for successful long-term equity investing. Why Moats Matter is co-authored by Heather Brilliant, co-chief executive officer of Morningstar Australasia and recently global head of equity and corporate credit research for Morningstar, and Elizabeth Collins, Morningstar’s director of equity research, North America. Other members of Morningstar’s equity and corporate credit and quantitative research teams also contributed to the book. In Why Moats Matter, Morningstar’s experts:

• Explain the concept of economic moats and moat trends and the five sources of sustainable competitive advantage—Intangible Assets, Switching Costs, Network Effect, Cost Advantage, and Efficient Scale.
• Establish the difference between business quality and undervalued stocks.
• Discuss standards for evaluating moats by sector and industry.
• Clarify how moats affect stock returns and stock valuation.
• Offer portfolio strategies for putting the power of moats and valuation to work.

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