The Little Book That Builds Wealth
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"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
Product 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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Most Helpful Customer Reviews
5 of 5 people found the following review helpful
Format:Hardcover
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. It can't, of course, turn you into a Buffett superinvestor overnight - much as we'd all like. You still need a qualitative feel for companies that no book can really give you. The good news is that this qualitative understanding is an accretive process that can be obtained by reading lots of accounts and business newspapers/magazines.
I suggest reading this book, together with Intelligent Investor by Ben Graham, and The Little Book That Beats The Market by Joel Greenblatt. You might also want to perform a web search for Li Lu, who has recently been identified officially for the role of Berkshire Hathaway's chief investment officer.
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. It can't, of course, turn you into a Buffett superinvestor overnight - much as we'd all like. You still need a qualitative feel for companies that no book can really give you. The good news is that this qualitative understanding is an accretive process that can be obtained by reading lots of accounts and business newspapers/magazines.
I suggest reading this book, together with Intelligent Investor by Ben Graham, and The Little Book That Beats The Market by Joel Greenblatt. You might also want to perform a web search for Li Lu, who has recently been identified officially for the role of Berkshire Hathaway's chief investment officer.
2 of 2 people found the following review helpful
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
- 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
Format:Hardcover
Simple and easy flow of writing with thourough explanations given of technical side, thus enabling a complete novice to understand the subject.
This book should be in every investors library!
This book should be in every investors library!
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