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Stocks 206: What's behind Economic Moats and Competitive Positioning

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1.
Why is pricing power so important to wide-moat companies?
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Firms with pricing power are able to generate higher profits. Pricing power depends on a competitive advantage of some sort, a strong brand or a unique asset, and permits the firm to generate stronger operating margins and profits over time. These profits contribute to above-average returns.
2.
Private-label products are an example of _______.
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Threat of substitutes. Private-label products are an example of the threat of substitutes. These products threaten the sales and margins of branded products, which are typically more expensive to produce.
3.
An example of easy entry into a market would be _______.
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A company signing up to become a seller on eBay. Signing up for eBay would be a good example of a new company easily entering the marketplace.
4.
If a company is involved in doing a lot of different things very well, that is a sign that it has a deep economic moat.
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True. In this case, they are really good at more than one competitive advantage.
5.
Regarding buying companies that have economic moats, which is probably the more profitable strategy?
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Buying them, holding them for a long time, and then selling them. Given their advantages in their industries, you would likely come out ahead by holding them for a long time.