Related: Switching Costs Provide Advantage for Targeted
For example, CSX Corporation (NasdaqGS: CSX) exhibits a wide economic moat, according to Morningstar, based on cast advantages and efficient scale. The company is a rail transportation company that operates in the Eastern U.S. and controls 20,800 miles of track, moving coal products, chemicals, intermodal/shipping containers, and other merchandise. Given its wide network of tracks and physical assets in place, it is nearly impossible for a new entrant to replicate in a competitive fashion.
United Parcel Services (NYSE: UPS) is also known for its efficient scale, along with cost advantage and network effect. The company has established an integrated international shipping network that is unlikely to be matched by few global competitors due to its extensive physical assets already in place, which would be very costly to replicate.
To capitalize on this efficient scale attribute, investors can take a look at the VanEck Vectors Morningstar Wide Moat ETF (NYSEArca: MOAT), which implements Morningstar’s wide moat methodology. MOAT is up 16.2% year-to-date, compared to the 15.5% gain for the S&P 500.
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