Wide-moat stocks are companies with strong and sustainable advantages that protect them from competition. Their competitive advantages ensure long-term profitability and make these companies sound investments.
There are many ways for a business to build a wide moat. Some wide-moat companies have recognizable brands that attract customers or allow them to charge premium prices. A company can build an economic moat if it's able to reduce its fixed costs lower than those of its competitors. Regulatory barriers can also provide a moat by preventing other companies from entering a market.
Best wide-moat stocks in 2025
Here are the five best wide-moat stocks and the competitive advantages they have.
1. Visa
NYSE: V
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NASDAQ: ADBE
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Software company Adobe has an impressive portfolio of products for creative design, document management, and marketing. Some of its most notable products include:
- Photoshop for image editing and design.
- Premier Pro for video editing and creation.
- Adobe Acrobat for viewing and editing PDFs, and Adobe Acrobat Sign for e-signatures.
These are all widely used and highly recognizable products. Photoshop may not be the only image editing software, but it's the first one that comes to mind for most people. Adobe is also constantly innovating. In recent years, it has been incorporating artificial intelligence (AI) tools into its product line.
For its 2024 fiscal year, Adobe reported $19.1 billion in gross profit, a 12% increase from the prior year. With the strength of its products and its AI upgrades, Adobe still has plenty of room to grow.
3. Fair Isaac Corporation
Fair Isaac Corporation, or FICO for short, is an analytics company that develops credit scoring models. It's the company behind the FICO® Score model, which is the industry standard for lending decisions. While there are other types of credit scores out there, 90% of top lenders use FICO® Scores.
FICO charges financial institutions for its credit scores, and it has dozens of different types of scores to serve different markets. There are FICO® Scores for credit card companies, auto lenders, and mortgage lenders. It also has subscription plans that consumers can purchase to stay on top of their credit.
The fact that FICO® Score is the default score option is a significant competitive moat that has helped it increase profits over the years. It reported net income of $512.8 billion in its 2024 fiscal year, a 19% year-over-year increase.
4. ASML
NASDAQ: ASML
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Semiconductors are an essential component of much of the technology we use every day, including computers and smartphones. ASML manufactures lithography systems, a key part of semiconductor production. Companies use lithography systems to etch patterns onto the wafers of their semiconductor chips.
The most advanced chips, including top AI chips, require extreme ultraviolet (EUV) lithography. The production of an EUV lithography system is a massive undertaking, and there's currently only one company that does it -- ASML. Its EUV lithography systems sell for hundreds of millions of dollars, and it has a backlog of orders. Customers include Taiwan Semiconductor Manufacturing (NASDAQ:TSM) and Intel (INTC -0.61%).
ASML is a Dutch company, and it reported 7.6 billion euros in net income in 2024. That was a slight decrease from 7.8 billion euros in 2023. However, the semiconductor industry is expected to surpass $1 trillion by 2030, so demand for ASML's products should continue to rise.
In all likelihood, ASML will continue to be the only company making EUV lithography systems for at least several years. While that may seem like more of a narrow moat, ASML is already partnered with some of the top tech companies, and its EUV systems are highly advanced. It will take a substantial investment of time and money for any competitors to cut into its market share.
5. Costco
NASDAQ: COST
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Warehouse club Costco has a few big advantages over other retailers. For starters, it has more than 135 million members who pay an annual fee to shop at its stores. They tend to be loyal, too -- renewal rates normally top 90%. Unlike other stores, Costco doesn't carry a huge variety of products. Warehouses carry about 4,000 stock-keeping units (SKUs), compared to about 30,000 at most supermarkets and 140,000 at a typical Walmart (WMT -0.79%).
Because Costco makes so much money from memberships, it can accept much lower profit margins than most retailers. Its relatively small selection of products also gives it more negotiating power with suppliers. Suppliers know that their products will have less competition at Costco and that shoppers trust Costco to stock only high-quality products.
Costco's negotiating power also comes into play with its payment processing fees. Most major U.S. retailers accept credit cards from any payment network. Costco warehouses in the U.S. only accept Visa credit cards. In return for this exclusivity, Costco pays much lower processing fees to Visa than other merchants.
For its 2024 fiscal year, Costco reported $7.4 billion in net income, a 17% increase from what it made in 2023.
How to invest in wide-moat stocks
When you've found a wide-moat company you like, here's how to invest:
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
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