It's not moat size that matters

Conventional wisdom and financial textbooks will stress the importance of valuing a company’s competitive advantage or economic moats. WCM Investment Management has moulded this strategy, instead placing their focus on the direction of company moats.

WCM believes that competitive advantages are not static. What is more important for investors is whether a business growing or losing this advantage over time rather than how big that advantage currently is. Sanjay Ayer cites incumbents of the past - Blackberry, Nokia and Dell - as examples where investors failed to see contracting competitive advantages.

"Investors tend to underestimate the damage that can be caused when a company's competitive advantage is shrinking. It's not a slow bleed. Usually, it's a sharp decline" says Ayer.

Ayer explains this approach employed at WCM and one stock which his fund believes is losing their competitive advantage.