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

4.18 of 5 stars 4.18  ·  rating details  ·  271 ratings  ·  22 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
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):

In my experience, the most common “mistaken moa
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
Jonathan Perez
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
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
Nathan Dellinger
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
Mohamed Fasil
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
I'm not generally a fan of the Little Book series, as I think most of them are summarised rip-offs. This one (didn't buy it, got it free) is pretty good though -- there's actually new intellectual content in there that was thought provoking and, I think, practically useful.

Dorsey's contribution comes from his analysis of what truly constitutes economic moats (or sustainable competitive advantage, or whatever else you want to call it), and his distinction between genuine moats and "mistaken" one
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
Vikas Agarwal
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.
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.
Julian Bu
possibly the best book on moat investing, somewhat surprisingly coming not from a professional manager but a researcher
A very easy-to-read book about moat and competitive advantages.
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
[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
Palash Kusumwal
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.
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
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.
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.
Sergei Nemirovsky
This is a very well written and easily read book on investing principles practiced by Buffett and Munger. It was a pleasure to read.
good "economic moat" framework. Definitely provides enormous foods for thought.
Chad Touchberry
Good book on ID'ing economic moats.
Aug 29, 2012 A added it
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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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