The second quarter of 2025 has been a whirlwind for global markets. Ever since President Donald Trump announced sweeping reciprocal tariffs on April 2, uncertainty has dominated the headlines. Against this backdrop, analysts at Morningstar quietly made some significant moves—adjusting the “economic moat” ratings of several well-known U.S. companies.
If you’re not already familiar, an economic moat refers to a company’s ability to fend off competitors and maintain profitability over time. Think of it as a fortress wall protecting a business from rivals. Morningstar classifies these moats as “wide” (expected to last 20+ years), “narrow” (10–20 years), or none at all.
These ratings aren’t tweaked lightly. They’re built on long-term analysis rather than headline-driven hype. As Allen Good, head of Morningstar’s moat ratings committee, puts it: “Share price volatility doesn’t always mean the business itself has changed. But when it has, we adjust.”
Out of the 847 U.S.-listed stocks Morningstar covers, six saw a change in moat ratings this past quarter—three upgrades and three downgrades. While that number may sound small, the implications can be big for long-term investors.
Take Goldman Sachs, for instance. Morningstar upgraded its economic moat from narrow to wide, citing its entrenched position in capital markets and strong brand power. The fair value estimate jumped to $580 per share from $490. For someone like Anna, a private wealth advisor working in Manhattan, Goldman’s competitive edge is more than academic—it’s her daily reality. “Clients trust Goldman with their wealth because the firm has the relationships and infrastructure others just don’t,” she says.
Interactive Brokers also moved up from narrow to wide. Thanks to its razor-thin cost structure and industry-leading trade execution, analysts believe it’s in a strong position to resist disruption. Its niche client base and tech-first model make it difficult for traditional brokers to compete. Sean Dunlop, the analyst behind the upgrade, emphasized how rare that combination is in today’s market.
Grainger, the industrial supply company, saw its moat upgraded as well. Morningstar praised its deep market penetration and efficient capital deployment. Its valuation soared accordingly—from $700 to $910 per share. While it might not be as flashy as a tech stock, Grainger’s steady hand and smart logistics have made it a backbone supplier for thousands of businesses across America.
But not all the news was positive.
CVS Health and Centene, both in the managed care space, were downgraded from narrow moats to no moats. Regulatory uncertainty and competitive pressures were key factors. While the market often panics over healthcare policy, Julie Utterback, a senior analyst at Morningstar, suggests the impact may be overstated. “We suspect Republican initiatives will moderate the changes,” she wrote. Still, the downgrades are a red flag for long-term investors.
Over in the chemicals sector, International Flavors & Fragrances (IFF) lost its moat due to concerns about capital allocation. Analysts believe the company is pouring too much money into its low-margin food ingredients segment, potentially dragging down overall returns.
For everyday investors, these kinds of moat rating shifts can be a valuable signal.
Take Sarah, a retired teacher from Michigan. She’s not looking to beat the market overnight—she wants dependable, long-term growth. “If a company has a wide moat, I feel more confident holding it for years,” she explains. “It’s like owning a goose that lays golden eggs.”
So, what exactly gives a company a moat?
Morningstar identifies five key sources:
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Switching Costs: It’s too painful or expensive for customers to leave.
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Network Effects: The more people use the product, the more valuable it becomes.
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Intangible Assets: Patents, licenses, or brand power that others can’t easily replicate.
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Cost Advantage: Doing the same job, but cheaper.
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Efficient Scale: Dominating a market where it doesn’t make sense for more players to enter.
These aren’t just academic terms—they're real business defenses. For example, think about how Amazon’s scale lets it undercut smaller competitors, or how Coca-Cola’s brand loyalty keeps people coming back despite the price.
Understanding economic moats isn’t just for Wall Street professionals. It’s a practical way for everyday investors to cut through the noise and focus on what matters: long-term business strength. And when those moats widen—or disappear—it’s worth paying attention.
As Warren Buffett famously said, “The most important thing in evaluating a business is figuring out how big the moat is around it… and how durable that moat is.” In a market filled with hype, that kind of clarity is invaluable.
Whether you’re managing a million-dollar portfolio or just starting out with a few hundred dollars, the companies that build—and keep—their moats are the ones most likely to win the long game.