Systematic Economic Moat
As you are reading this segment, chances are you will either use an iPhone as a mobile device, or a Windows Desktop PC or Notebook respectively. Apple and Microsoft possess such a huge market share and are surrounded by Economic Moats, a concept that is analyzed in Solactive’s latest white paper.
The publication explores a rules-based approach to select companies with lasting competitive advantages. In the paper, Solactive presents the Solactive Systematic Moat Index concept, which is an alternative way for quality investing. This strategy falls under the Solactive Intuitive BetaTM family, an investing approach relying on intuition and gut feeling as a starting point.
Simplified, the fundamental structure of a competitive advantage consists of three levels, which are the following: low cost of production or differentiation power, scalability of the business model, as well as a company’s intellectual properties like franchises, patents, or licenses. The paper argues that in order to be surrounded by an Economic Moat, companies should maintain their unique selling proposition by means of products or services that lead to high switching costs for customers, and trigger strong network effects.
To read the full white paper, please click on the link below.