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The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments (Little Books. Big Profits) [Kindle Edition]

Pat Dorsey
4.6 out of 5 stars  See all reviews (9 customer reviews)

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Book Description

In The Little Book That Builds Wealth, author Pat Dorsey—the Director of Equity Research for leading independent investment research provider Morningstar, Inc.—reveals why competitive advantages, or economic moats, are such strong indicators of great long-term investments and examines four of their most common sources: intangible assets, cost advantages, customer-switching costs, and network economics. Along the way, he skillfully outlines this proven approach and reveals how you can effectively apply it to your own investment endeavors.


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Review

"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)

"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)

“With this suitably small–sized book under your arm – or neatly in your handbag – the World’s markets are yours.”Investment Adviser Monday 12 May 2008

From the Inside Flap

To make money in today′s dynamic market environment, you need to invest in companies that will perform in the face of sustained competitive pressure. But how can you accurately identify companies that are great today and likely to remain great for many years to come?

The answer to this question lies in competitive advantages, or economic moats. Just as moats were dug around medieval castles to keep the opposition at bay, economic moats protect the high returns on capital enjoyed by the world′s best companies. If you can identify companies that have moats, and you can purchase their shares at reasonable prices, you′ll begin to build a portfolio of solid businesses that will improve your odds of doing well in the stock market.

In The Little Book That Builds Wealth, author Pat Dorsey—the Director of Equity Research for leading independent investment research provider Morningstar, Inc.—outlines this proven approach and reveals how you can effectively apply it to your own investments. Step by step, Dorsey discusses why economic moats are such strong indicators of great long–term investments and examines four of their most common sources: intangible assets, cost advantages, customer–switching costs, and network economics. After establishing a firm understanding of moats, Dorsey shows you how to recognize moats that are eroding, the key role that industry structure plays in creating competitive advantage, and how management can create (as well as destroy) moats.

Along the way, Dorsey provides an informative overview of valuation—because even a wide–moat company will be a poor investment if you pay too much for its shares—and illustrates the issues addressed through case studies that apply competitive analysis to some well–known companies.

Although the moat concept is not a new one—it was made famous by Warren Buffett—the modern–day investor can benefit from what it has to offer. With The Little Book That Builds Wealth as your guide, you′ll quickly discover why moats should be an integral part of your analytical investment toolkit and learn how to leverage this approach to build a portfolio of high–performance stocks.


Product details

  • Format: Kindle Edition
  • File Size: 628 KB
  • Print Length: 126 pages
  • Publisher: Wiley; 1 edition (18 May 2009)
  • Sold by: Amazon Media EU S.à r.l.
  • Language: English
  • ASIN: B008L045N4
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Enabled
  • Enhanced Typesetting: Not Enabled
  • Average Customer Review: 4.6 out of 5 stars  See all reviews (9 customer reviews)
  • Amazon Bestsellers Rank: #285,173 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

4.6 out of 5 stars
4.6 out of 5 stars
Most Helpful Customer Reviews
7 of 7 people found the following review helpful
5.0 out of 5 stars Moat is King 15 Nov. 2009
Format:Hardcover
Warren Buffett coined the term moat which represents a competitive advantage that a company can possess over its competitors. Pat Dorsey did a great job explaining what a moat is and categorized it into four categories: Intangible Assets, Switching Costs, Network Effect, and Cost Advantages. Whenever I talk to a potential client or give a seminar on investing, I always talk about moats stemming from four sources that Mr. Dorsey explained. I absolutely loved this book.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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12 of 13 people found the following review helpful
5.0 out of 5 stars Changed the way I thought about investment 4 Aug. 2010
Format:Hardcover|Verified Purchase
I have been heavily influenced by the writings of Ben Graham. Consequently, I have tended to own a lot of low price-earnings, low price-to-book goo, and often been disappointed with the results - cheap stocks that went on to get even cheaper. It was time for me to consider a better approach: higher quality companies at reasonable prices (or very cheap, if they're available) - the Warren Buffett approach. Everybody, of course, wants to be the next Warren Buffett. He talks extensively about wonderful businesses, but says little about how these things are identified.

This is where this Little Book comes in. It talks about "moats" (which Greenwald refers to as "franchises", or which you or I could call simply "mini-monopolies"), and tries to identify the difference between true moats and false moats (i.e. ones that are currently earning high returns on capital, but whose advantage is likely to be quickly eroded though competition). He also reviews the sectors in which moats are likely to be found (he likes financials quite a lot). He identifies the types of moats (for example, those involving high switching costs to the consumer). He also suggests looking at numbers like ROE (return on equity), ROA (Return On Assets) and ROIC (Return On Invested Capital) as a way of identifying potential investments. So you could, for example, use a stock screener to screen for high ROE as a starting point. He also covers establishing a suitable buy price, and a sell decision.

The book goes a long way to giving practical advice into analysing a situation, and has more substance than a lot of the generic waffle that you hear bandied about Buffett's investing style. This book has certainly been food for thought for me.
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2 of 2 people found the following review helpful
Format:Hardcover
This is the most interesting book on investment that I've read this year. Most investment books focus on financial analysis of past results, while the value of an investment comes from the future cash flow, as Dorsey reminds us.
Finding a business with a long term competitive advantage, or "moat", is the focus of this book, and it's well explained.
I only have one criticism: this book is too small, there is still a lot to write about how to find a business with a large moat.
I look forward "the BIG book that builds wealth"!
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2 of 3 people found the following review helpful
4.0 out of 5 stars A sensible approach to picking stocks 2 Nov. 2009
By Rolf Dobelli TOP 1000 REVIEWER
Format:Hardcover
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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4.0 out of 5 stars Good overview 18 Mar. 2015
By AJS101
Format:Hardcover|Verified Purchase
Good introduction to how some companies generate above market returns over long periods of time. However, having read the book, I'm not sure if I learnt enough to look at a company and determine how strong it's moat is or how long it will last.
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