The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

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Overview

To make money in today's dynamic market environment, you need toinvest in companies that will perform in the face of sustainedcompetitive pressure. But how can you accurately identify companiesthat are great today and likely to remain great for many years tocome?

The answer to this question lies in competitive advantages, oreconomic moats. Just as moats were dug around medieval castles tokeep the opposition at bay, economic moats protect the high returnson capital enjoyed by the...

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Overview

To make money in today's dynamic market environment, you need toinvest in companies that will perform in the face of sustainedcompetitive pressure. But how can you accurately identify companiesthat are great today and likely to remain great for many years tocome?

The answer to this question lies in competitive advantages, oreconomic moats. Just as moats were dug around medieval castles tokeep the opposition at bay, economic moats protect the high returnson capital enjoyed by the world's best companies. If you canidentify companies that have moats, and you can purchase theirshares at reasonable prices, you'll begin to build a portfolio ofsolid businesses that will improve your odds of doing well in thestock market.

In The Little Book That Builds Wealth, author PatDorsey—the Director of Equity Research for leading independentinvestment research provider Morningstar, Inc.—outlines thisproven approach and reveals how you can effectively apply it toyour own investments. Step by step, Dorsey discusses why economicmoats are such strong indicators of great long-term investments andexamines four of their most common sources: intangible assets, costadvantages, customer-switching costs, and network economics. Afterestablishing a firm understanding of moats, Dorsey shows you how torecognize moats that are eroding, the key role that industrystructure plays in creating competitive advantage, and howmanagement can create (as well as destroy) moats.

Along the way, Dorsey provides an informative overview ofvaluation—because even a wide-moat company will be a poorinvestment if you pay too much for its shares—and illustratesthe issues addressed through case studies that apply competitiveanalysis to some well-known companies.

Although the moat concept is not a new one—it was madefamous by Warren Buffett—the modern-day investor can benefitfrom what it has to offer. With The Little Book That Builds Wealthas your guide, you'll quickly discover why moats should be anintegral part of your analytical investment toolkit and learn howto leverage this approach to build a portfolio of high-performancestocks.

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Editorial Reviews

From the Publisher
"A detailed exploration of Warren Buffet's "wide economic moat" concept - how to find companies with a true in-built competitive advantage." (Financial Times, Tues 26th February)

"Pat Dorsey...discusses in an easy to read style why economic moats are such great indicators of long term performance." (Pensions World, October 2008)

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Product Details

  • ISBN-13: 9780470226513
  • Publisher: Wiley
  • Publication date: 3/3/2008
  • Series: Little Books. Big Profits Series, #12
  • Edition number: 1
  • Pages: 126
  • Sales rank: 285,957
  • Product dimensions: 5.00 (w) x 7.10 (h) x 0.90 (d)

Meet the Author

Pat Dorsey, CFA, is Director of Equity Research at Morningstar, Inc. He played an integral part in the development of the Morningstar Rating for stocks, as well as Morningstar's economic moat ratings. Dorsey is also the author of The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market (Wiley). He holds a master's degree in political science from Northwestern University and a bachelor's degree in government from Wesleyan University. Please visit www.findingmoats.com.

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Table of Contents

Foreword.

Acknowledgments.

Introduction. The Game Plan.

Chapter 1. Economic Moats.

Chapter 2. Mistaken Moats

Chapter 3. Intangible Assets

Chapter 4. Switching Costs.

Chapter 5. The Network Effect.

Chapter 6. Cost Advantages.

Chapter 7. The Size Advantage.

Chapter 8. Eroding Moats.

Chapter 9. Finding Moats.

Chapter 10. The Big Boss.

Chapter 11. Where The Rubber Meets The Road.

Chapter 12. What's A Moat Worth.

Chapter 13. Tools For Valuation.

Chapter 14. When To Sell.

Conclusion. More Than Numbers.

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Customer Reviews

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Sort by: Showing all of 2 Customer Reviews
  • Posted November 2, 2009

    more from this reviewer

    A sensible approach to picking stocks

    How do you pick stocks? Do you pay attention to earnings? Chart patterns? Growth potential? Your Uncle Morty? Instead of all that, use the same basic system that investment guru Warren Buffett perfected: Look for solid profitable companies that own a piece of the market, buy their stock and hold it a long time. Morningstar, the investment research company, uses the same approach to analyze and rate stock values. Its director of equity research, Pat Dorsey, explains its stock analysis system in this small volume. The stock selection system calls for seeking companies with protected unique advantages, called "economic moats." What sounds straightforward in theory may not be as easy in practice: Finding a structurally protected stock today is not necessarily a simple stroll across the drawbridge. Still, getAbstract finds Dorsey's presentation succinct and readable, and recommends it to investors who are not yet familiar with value investing and similar approaches.

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  • Posted April 2, 2009

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    Money matters.

    This book provides U with sound financial information; it is not 4 the purpose of getting rich quick. It is 2 provide U with financial literacy and assist U 2 build Ur finances over time. It gives U a prospective on dealing with Ur finances at the present time, and setting future $$ goals. Assists U 2 use Ur $$ 2 build or bring in more $$ by using $$ 2 make $$, Ur $$ works 4 U, instead of U working 4 $$; U learn about stock and real investments. It is great for learning the vocabulary of investing.

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