"In business, I look for economic castles protected by unbreachable 'moats'."
-- Warren Buffett
According to Warren Buffett, the wider a business' moat, the more likely it is to stand the test of time.
In days of old, a castle was protected by a moat that circled it. The wider the moat, the more easily a castle could be defended, as its width and depth made it very difficult for enemies to approach. A narrow and shallow moat did not offer much protection and allowed enemies easy access to the castle. To Buffett, the castle is a company's business and the moat is its competitive advantage. He wants his managers to continually increase the size of the moats around their castles.
Over history, when looking to purchase a business, Buffett has paid careful attention to a business he understands -- not just in terms of what the business does but also of "what the economics of the industry will be 10 years down the road, and who will be making the money at that point." He also looks for "enduring competitive advantages."
This, in a nutshell, is what makes a company great: the width and depth of the moat around the company's core business.
Read this full piece from TheStreet's Doug Kass here.