Warren Buffett talks about economic moats, and an economic moat is similar to the castles in the middle ages which had a ring of water around them. Castles are designed for both offensive (to be seen and see the potential enemies) and defensive ( very hard to break in) reasons. If there is water around the castle, it is hard to walk over the water. Craig McGee of Morningstar Research Inc examined stocks in the Morningstar data base to see which companies have an economic moat and how would the returns be if you had invested in them. He was looking at the top 20 stocks with the best combination of price to sales; price to earnings; return on equity. He found if you owned these stocks your return would easily beat the index, often double and equally important using less risk. The model suggests if you wish to own stocks, these are types you want to own. When you buy looked at how wide the economic moat is.