3 Stocks With Unbreakable Moats: Visa, Google, and Costco

Not all moats are created equal. Some companies have competitive advantages that look strong on paper but crumble under pressure. Others have built fortresses so deep that competitors have spent billions trying to break in and barely made a dent.

Visa, Google, and Costco represent three completely different types of moats, but they share one thing in common: decades of failed attempts by competitors to dislodge them. One dominates global payments through network effects. Another controls the gateway to the internet through a self-reinforcing data flywheel. And the third built a membership model so powerful that it can sell products at near-zero markup and still generate billions in profit.

Here is what makes each of these moats practically unbreakable, and what investors can learn from studying them.

Visa (V): The Toll Booth on Global Commerce

Moatifi Score: 10/10

Visa's moat analysis on Moatifi reveals something remarkable: a perfect 10/10 score. That is not a number handed out lightly.

Visa operates in over 200 countries and territories, processing trillions of dollars in transactions annually. But here is the part most people miss: Visa does not lend money. It does not take on credit risk. It simply sits in the middle of every transaction and takes a small fee. This asset-light model means Visa converts an extraordinary percentage of revenue into profit.

Why the Network Effect Is Nearly Impossible to Break

Visa's moat is a textbook network effect, and it is one of the strongest examples in any industry. More merchants accept Visa because more consumers carry Visa cards. More consumers carry Visa cards because more merchants accept them. This cycle has been compounding for decades.

Think about what a competitor would need to do to challenge Visa:

  • Sign up millions of merchants worldwide. Visa already has them.
  • Convince billions of consumers to switch cards. Consumers carry what merchants accept.
  • Build the infrastructure to process transactions in 200+ countries. That took Visa decades and billions of dollars.

Warren Buffett has spoken repeatedly about his admiration for payment network businesses. The reason is simple: once a payment network reaches critical mass, it becomes almost impossible to displace. The economics only get better with scale because each additional transaction costs almost nothing to process.

The Numbers Tell the Story

Visa's return on equity and return on invested capital are consistently among the highest of any public company. The business generates enormous free cash flow with minimal capital expenditure requirements. Unlike a manufacturer that needs to build factories or a retailer that needs to lease storefronts, Visa's core product is a digital network that scales almost infinitely.

This is why Visa earns a perfect moat score. The competitive advantage is not just strong today; it gets stronger every year as transaction volume grows.

Alphabet/Google (GOOGL): The Data Flywheel That Feeds Itself

Moatifi Score: 9/10

Google controls over 90% of global search market share. That number has barely budged in over a decade, despite Microsoft pouring billions into Bing and integrating AI features aggressively. Check the full Google moat breakdown on Moatifi for the detailed scoring.

The Self-Reinforcing Flywheel

Google's moat is a data flywheel that competitors simply cannot replicate:

  1. More users search on Google because the results are better.
  2. Better results attract more advertisers, generating more revenue.
  3. More revenue funds better AI and algorithms, making results even better.
  4. Better results attract more users. The cycle repeats.

This flywheel has been spinning for over two decades. Each rotation makes it harder for competitors to catch up because Google has more data to train on, more revenue to invest in R&D, and more user trust built up over years.

Beyond Search: Multiple Moats Stacked Together

What makes Google's position even more formidable is that it is not just a search company. Consider the full ecosystem:

  • YouTube is the second largest search engine in the world and the dominant video platform. Creators go where the audience is, and the audience goes where the creators are. Another network effect.
  • Android runs on over 3 billion devices worldwide. That is 3 billion devices defaulting to Google Search, Google Maps, Gmail, and the Google Play Store.
  • Google Cloud is a fast-growing enterprise business with high switching costs. Once a company builds its infrastructure on Google Cloud, migrating away is expensive and risky.
  • AI and DeepMind represent some of the most advanced artificial intelligence research on the planet. Google is not just participating in the AI race; it is funding foundational research that could define the next generation of computing.

The "Verb" Test

Here is a simple moat test: has the company's name become a verb? "Google it" is used in dozens of languages worldwide. When your brand name becomes synonymous with an entire category, you have achieved something that no amount of advertising spend can buy. That level of consumer mindshare is a moat in itself.

Costco (COST): The Moat That Traditional Screeners Miss

Moatifi Score: Complicated (and that is the point)

Costco is the most interesting case study of the three because it challenges conventional screening methods. With a net margin of roughly 2.5%, Costco fails most traditional profitability screens, including the 20% net margin threshold that many Buffett-style screeners use.

And yet, Warren Buffett held Costco stock for years. Charlie Munger called it one of his favorite businesses and sat on its board. Why would two of the greatest investors in history love a company with razor-thin margins?

Because Costco's low margins are not a weakness. They are the moat.

The Membership Model: A Virtuous Cycle Competitors Cannot Crack

Costco's business model works like this:

  1. Charge a membership fee ($65/year for basic, $130/year for Executive).
  2. Use membership revenue to cover operating costs, so the retail operation does not need to generate significant profit on its own.
  3. Price products at near-zero markup, offering dramatically lower prices than competitors.
  4. Lower prices attract more members, generating more membership revenue.
  5. More members mean more buying power, enabling even lower prices from suppliers.
  6. Repeat.

The numbers behind this cycle are staggering. Costco has over 130 million cardholders with a renewal rate above 90%. That means nine out of ten members choose to pay again every year. Membership fee revenue alone is enough to cover the company's operating expenses, which means Costco could theoretically sell every product at cost and still break even.

Why Competitors Cannot Replicate This

Here is the challenge for anyone trying to compete with Costco: you cannot just copy the membership model. To offer prices as low as Costco, you need massive buying power. To get massive buying power, you need millions of members. To get millions of members, you need prices as low as Costco.

It is a chicken-and-egg problem that would take decades and billions of dollars to solve. Amazon tried with its own warehouse-style approach and largely settled into a different niche. Walmart has Sam's Club, which competes but has never matched Costco's renewal rates or member loyalty.

The 90%+ renewal rate is the key metric here. It tells you that members are not just satisfied; they are getting enough value that paying the fee every year is an obvious decision. That kind of customer lock-in, built on genuine value rather than switching costs, is exceptionally durable.

The Lesson for Screeners

Costco teaches an important lesson: no screener captures everything. Quantitative filters are powerful tools for narrowing a universe of thousands of stocks down to a manageable list. But some of the best businesses in the world will not show up on screens that filter for high margins, because their moat is built on keeping margins low deliberately.

This is why the Moatifi screener is a starting point, not an endpoint. The screener identifies companies with strong quantitative characteristics. But the best investors combine quantitative screening with qualitative judgment about the nature and durability of a company's competitive advantage.

What These Three Moats Have in Common

Despite being in completely different industries, Visa, Google, and Costco share several traits that define truly unbreakable moats:

  • Network effects or scale advantages that compound over time. Each year these businesses operate, they become harder to compete with, not easier.
  • Decades of failed competitive attacks. These are not theoretical moats. Real companies have spent real billions trying to break them and failed.
  • Business models that align company incentives with customer value. Visa makes payments seamless. Google makes information accessible. Costco saves members money. When your profit comes from genuinely serving customers well, the moat reinforces itself naturally.

Find More Stocks With Moats

Want to discover other companies with durable competitive advantages? The Moatifi stock screener analyzes hundreds of stocks using Buffett-style criteria including return on equity, return on invested capital, debt levels, and management quality.

While no screener can capture every great business (as Costco reminds us), systematic screening is the best way to build a watchlist of companies worth researching further. Start screening today and find the moats hiding in plain sight.