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

4.22  ·  Rating Details  ·  474 Ratings  ·  33 Reviews
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-swit ...more
Hardcover, 200 pages
Published March 1st 2008 by John Wiley & Sons (first published January 1st 2008)
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Michael Cestas
Dec 24, 2014 Michael Cestas rated it really liked it
This book surprised me. While aimed at a lay audience, it covers moats in surprising detail. First it explains what moats are not (and what things are commonly mistaken for moats). Then it categorizes moats into several types and sub-types. It also discusses how moats erode and how to find moats.

In each section, I found a number of insights and useful comments, most of which are copied below (apologies for poor formatting / editing):

MISTAKEN MOATS
In my experience, the most common “mistaken moa
...more
Terry
Jan 15, 2015 Terry rated it it was amazing
Shelves: investing
Read it for the second time.

A good book on moat investing. Concise, with vivid examples and easy to read.

Key takeaways:

1. Four types of moats:
1) Intangible assets (license, patent and brand)
2) Switching cost
3) Network Effect
4) Cost advantages (unique assets, location, process)

2. These are NOT moats:
1) Great products
2) Strong market shares
3) Great execution
4) Great management

3. What determines a stock multiple?
1) Risk
2) Return on capital
3) Competitive advantages
4) Growth
E
Nov 02, 2009 E rated it really liked it
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, e
...more
Nathan Dellinger
Aug 21, 2013 Nathan Dellinger rated it really liked it
Shelves: stocks
Pat Dorsey does an excellent job at explaining some of the thoughts that go into the valuation of a company. The language is easy to understand and the writing is concise and to the point, making the book nice and short. I wouldn't go straight from this book and start trading immediately, but I think it gives good ideas to start valuing companies you like and are interested in. From that point you could paper trade or back test to see how your choices play out. The first half of the book on the ...more
Tirath
Apr 05, 2013 Tirath rated it really liked it
I love how the book focuses on understanding competitive advantages in terms of WB's concept of 'moats'. Talks about customer stickiness, intangible assets, the durability of earnings power and stuff like mistaken moats.
Analysts get caught in clubbing all brands equally, but brands empower a company with pricing power and customer stickiness. Amazing when customers cant really go anywhere else.
The strength of regulatory licenses and the weakness of patents.
The snowball effect of being part of a
...more
Vishnu Agarwal
Jul 13, 2016 Vishnu Agarwal rated it really liked it
Good book....It explains in great details about the kind of business one should own i.e., business with large and durable moats...Business with large moats can only generate very high Return on Capitals....The author identifies the four major categories which covers a large part of businesses having moats...
1. Intangibles - Brands, Patents (Pharma), Regulatory Licenses (Ratings)
2. Switching Costs - Banks/ Financials, IT Software Companies, Money managers
3. Networking effect - One platform used b
...more
Waseem
Dec 17, 2014 Waseem rated it liked it
Am not much of a stock trader/investor but I love picking up books on the topic which has success principles that can help you in all aspects of life - like this one ...

... However I this book in particular it was too much common sense and nothing greatly ground breaking... Something I've always had in mind about stocks/building or buying a business - is just re-affirmed in this book and something is hope any smart investor would at the very least know - but not poor either so 3 stars...

To Our C
...more
Christine
Apr 19, 2012 Christine rated it really liked it
[audiobook review]
If you pick stocks by only looking at P/E ratios or watching the trend of the share price over a period of time, then this book will probably help encourage you to spend a lot more time researching and thinking about why you are buying the stocks you are buying. It has straightforward outlines for how to determine companies that have economic "moats" and advantages, presents good examples, and injects quite a few plugs for morningstar.com.
Mohamed Fasil
Aug 14, 2014 Mohamed Fasil rated it it was amazing
Shelves: investing
Fantastic book for learning about moats. This books clearly explains what the moat is and how they are build around business. Pat Dorsey has neatly written in a simple to understand manner and I could read it very fast and re-read many times.

Some of the key points I take from this are
1. Switching cost
2. Network effects
3. Brand value
4. ROIC with Above all
Michele
Apr 09, 2016 Michele rated it it was amazing
Fantastic book that breaks down four different types of competitive advantage and why that is so important for finding good investments. Read it in an afternoon. Definitely one I will come back and reference.
Hariharan Ragunathan
May 14, 2015 Hariharan Ragunathan added it
Recommends it for: Definitely
Being a fan of Value investing made popular by Graham , Buffet & Munger. This book really talks about what does a Moat means and how to identify for companies. This does not tell you how to value but to see how to see the competitive advantages of company using a simple framework.
Palash Kusumwal
Nov 29, 2013 Palash Kusumwal rated it really liked it
While the author's focus is on picking good stocks, this is a good read for entrepreneurs to understand how industry analysts & investors analyze your company when you're in a very competitive industry. Concept of economic moats explained in a very easy to follow way.
C.J.
Jul 25, 2011 C.J. rated it it was amazing
A GREAT beginning book for people interested in learning the basics of company analysis. Not too accounting based (see"The Five Rules for Successful Stock Investing") but solid, nonetheless.
Mark Peacock
Jul 03, 2008 Mark Peacock rated it it was amazing
Great book by one of the founders of Morningstar. Provide solid advice for spotting businesses with "motes" to entry market. Helps recognize when the right time is for investing in great companies.
pavana Kumar Varanasi
Feb 21, 2016 pavana Kumar Varanasi rated it it was amazing
Very very good book that talks about competitive advantage of various industries. It is not the routine value investing stuff. Its about finding great companies (more of fisher than graham)
Vikas Agarwal
Aug 19, 2015 Vikas Agarwal rated it liked it
A simple to be read in couple of days. It pointed out a different way of valuing company. Its was good book and if you read it then surely you i will get couple of good things from this.
Sim
Nov 30, 2015 Sim rated it really liked it
Shelves: value-investing
Excellent book on moat however readers and beginners not familiar with the US market will have a hard time following the examples.

Does not cover instrinsic value.
Kate
Aug 05, 2011 Kate rated it it was amazing
I've been recommending this a lot lately to colleagues who are either trying to understand the point behind equity research or conduct competitive analyses.
Karthik Chinni
Oct 14, 2015 Karthik Chinni rated it it was amazing
The book covers a lot about identifying moats and some of the easy ways to identify them.
must read...
Price less for new value investors.
Julian Bu
Apr 24, 2014 Julian Bu rated it it was amazing
possibly the best book on moat investing, somewhat surprisingly coming not from a professional manager but a researcher
Youngju
Aug 06, 2014 Youngju rated it it was amazing
Shelves: investing
good "economic moat" framework. Definitely provides enormous foods for thought.
V R
Mar 02, 2016 V R rated it it was amazing
Very resourceful and must read for all investment professionals.
Dangewehr
Nov 21, 2015 Dangewehr rated it it was amazing
A very easy-to-read book about moat and competitive advantages.
Evan
Jan 18, 2016 Evan rated it it was amazing
How to find the real points that make a company strong
David
Sep 20, 2015 David rated it it was amazing
Very impressive. Contains insight that are timeless.
Jb
Jan 16, 2016 Jb added it
Small easy book on business-moats.
Chad Touchberry
Dec 29, 2012 Chad Touchberry rated it really liked it
Good book on ID'ing economic moats.
Bala Aramvalarthaan
Jan 25, 2016 Bala Aramvalarthaan rated it liked it
Recommended by Prof. Sanjay
A
Aug 29, 2012 A added it
need to read
Jonathan Perez
Dec 14, 2014 Jonathan Perez rated it really liked it
After having found out that Pat Dorsey was a close follower of Berkshire, Buffet and Munger, I did expect to find here a solid summary of the core value investing principles laid out by Benjamin Graham. It was not only that. I was pleasantly surprised to see that more than half of the book is dedicated to the understanding of economic competitive advantages and "moats" with several practical illustrations. One small critic though, the author gave me the impression that he described a lot of thes ...more
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“unless a company has some kind of economic moat, predicting how much shareholder value it will create in the future is pretty much a crapshoot, regardless of what the historical track record looks like. Looking at the numbers is a start, but it’s only a start. Thinking carefully about the strength of the company’s competitive advantage, and how it will (or won’t) be able to keep the competition at bay, is a critical next step.” 0 likes
“Even the Best Company Will Hurt Your Portfolio If You Pay Too Much for It.” 0 likes
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