Successful long-term investing involves more than just identifying solid businesses, or finding businesses that are growing rapidly, or buying cheap stocks. We believe that successful investing also involves evaluating whether a business will stand the test of time.
Moats are a useful framework to help answer this question. Identifying a moat will take a little more effort than looking up a few numbers, but we think understanding a company's competitive position is an important process for determining its long-term profitability. And as we stated earlier in this book, how well a company's stock performs is directly related to the profits the firm can generate over the long haul.