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The Little Book That Builds Wealth: The Knock-out Formula for Finding Great Investments (Little Books. Big Profits) [Hardcover]

Pat Dorsey
4.6 out of 5 stars  See all reviews (7 customer reviews)
RRP: 13.99
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Book Description

29 Feb 2008 Little Books. Big Profits (Book 12)
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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The Little Book That Builds Wealth: The Knock-out Formula for Finding Great Investments (Little Books. Big Profits) + The Little Book That Still Beats the Market: Your Safe Haven in Good Times or Bad (Little Books. Big Profits) + The Little Book of Value Investing (Little Books. Big Profits)
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Product details

  • Hardcover: 126 pages
  • Publisher: John Wiley & Sons; 1 edition (29 Feb 2008)
  • Language: English
  • ISBN-10: 047022651X
  • ISBN-13: 978-0470226513
  • Product Dimensions: 2.3 x 13.3 x 18 cm
  • Average Customer Review: 4.6 out of 5 stars  See all reviews (7 customer reviews)
  • Amazon Bestsellers Rank: 207,675 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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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.

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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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11 of 12 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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1 of 1 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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5.0 out of 5 stars simple yet powerful 29 Mar 2014
Format:Kindle Edition|Verified Purchase
A nice presentation of some well known ideas. But a nice reminder of what is important and what is not.
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