The concept of an Economic Moat was first popularized by Warren Buffett. An economic moat represents some unique competitive advantage that a company enjoys that is likely to sustain growth, profit margins, and market share for a long time to come. But what is the moat in stocks? Is it really possible for a company to create a unique advantage that cannot easily be replicated? When it comes to stock market investing, smart investors look at the concept of Wide Economic Moat (WEM). In fact, a wide economic moat is a measure of how real and how sustainable is your competitive edge as a business.

Normally, a business with a wide economic moat tends to get a better valuation in the stock markets. That is because it has already having a big lead over others and by the time other companies can catch up, this company with moat can take a big valuation lead ahead of others. For example, the ability to manage asset quality is a big moat for HDFC Bank, Kotak Bank and for Bajaj Finance. Distribution reach is a big moat for Hindustan Unilever and for ITCs. There can be numerous such examples.