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The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments
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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,
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Hardcover, 200 pages
Published
March 1st 2008
by Wiley
(first published January 1st 2008)
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Start your review of The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments
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 ...more
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 ...more
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 ...more
1. Intangibles - Brands, Patents (Pharma), Regulatory Licenses (Ratings)
2. Switching Costs - Banks/ Financials, IT Software Companies, Money managers
3. Networking effect - One platform used ...more
Clearly conveys meaning of moats and gives idea about how to find them.
I think that this is a very informational and intellectual book that covers the basics of people who want to be successful plus wealthy. I enjoyed the book quite a lot due to the information it provided about different types of techniques the successful investors like Warren Buffet use. I found it to be a guide for those who want to become rich and make money. Stocks, Investments, and financial literacy are something this little book covers the most. Over all a good book that I highly recommend
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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
Some of the key points I take from this are
1. Switching cost
2. Network effects
3. Brand value
4. ROIC with Above all
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.
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.
It's the best thing on competitive advantages ( moats ) I've read. It's well written, includes good case studies, breaks down the different types of moats and ends up being a framework for building or evaluating them. Highly recommend it.
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.
Does not cover instrinsic value.
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.
Very impressive. Contains insight that are timeless.
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)
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.
must read...
Price less for new value investors.
Recommended by Prof. Sanjay
A very easy-to-read book about moat and competitive advantages.
Jan 16, 2016
Jb
added it
Small easy book on business-moats.
Very resourceful and must read for all investment professionals.
The Little Book that Builds Wealth by Pat Dorsey is one of the crispiest and finest book to understand the field of investing. The book is little but the value offered is immense.
The book succinctly deals with the concept of moat/competitive advantage. For long term investments it is important to focus on companies with wonderful business with long term potential. The book offers deep understanding of the concept of moat/competitive advantage. It’s important to understand the attributes of moat ...more
The book succinctly deals with the concept of moat/competitive advantage. For long term investments it is important to focus on companies with wonderful business with long term potential. The book offers deep understanding of the concept of moat/competitive advantage. It’s important to understand the attributes of moat ...more
Little book yet very informative about economic moats. Some summary:
A. why moats?
-> overcome competition
-> durable competitive advantages
B. Moat traps
- Great products/services
- Great market share
- Good execution
- Good management
-> Not a moat
1. Intangible assets:
- Brands:
-> how businesses build brands? brands sustain a long time?
-> any special about that brand?
-> brands give businesses pricing power?
- Patents:
-> how many patents? have new patents regularly?
-> any special ...more
A. why moats?
-> overcome competition
-> durable competitive advantages
B. Moat traps
- Great products/services
- Great market share
- Good execution
- Good management
-> Not a moat
1. Intangible assets:
- Brands:
-> how businesses build brands? brands sustain a long time?
-> any special about that brand?
-> brands give businesses pricing power?
- Patents:
-> how many patents? have new patents regularly?
-> any special ...more
Warren Buffett has four main principles for investing in businesses. They need to be within his circle of competence, run by good management, have good long-term prospects and be available at a fair price. The little book that creates wealth gives the investor some well needed filters for how to think about good long-term prospects. In order to achieve high returns over the long term the business needs to have some type of competitive advantage or in Buffet terms, moat. A book that is most often
...more
After finally finishing The Little Book that Builds Wealth, I have concluded that I will never be a stock market investor. I simply don’t have enough interest to devote the time outside of mutual funds. However, if you have any interest in economics and investing in stocks, this book will help you, whether or not you decide to follow through. Dorsey gives a few guidelines for finding companies that have strong “moats,” or economic reserves that help the company thrive regardless of the economic
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This book is surprisingly good (should not judge a book by its cover or title in this case). It covers only 1 thing: moats (a.k.a competitive advantages) in a company and I think this is one of the best, if not THE best book on this subject.
The author went in-depth talking about different kinds of moats, especially highlighted things are easily mistaken for moats (better product, higher market share, or better internal processes etc). The true moats are very rare and for most companies, you ...more
The author went in-depth talking about different kinds of moats, especially highlighted things are easily mistaken for moats (better product, higher market share, or better internal processes etc). The true moats are very rare and for most companies, you ...more
This book succinctly summarizes the underlying principles of investing in financial assets e.g. company stocks, for the long-run. The author uses the concept of economic moat as a thought experiment, to differentiate between companies with strong competitive advantages with others. Companies with strong economic moats have high competitive advantages, which cannot be easily nullified/replicated by competitors or new entrants. Factors like customer stickiness, brand image, natural monopoly and
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Stock pickers need to realize that picking stocks isn't simply about poring over the financial statements. It is about buying great companies that can compound sales and profits for years leading to share prices going up manifold over time. It is about being able to understand why certain companies go on to become great and why others fail.
This book makes a terrific case for companies with moats (sustainable competitive advantages) as the cornerstone of any successful equity portfolio. It ...more
This book makes a terrific case for companies with moats (sustainable competitive advantages) as the cornerstone of any successful equity portfolio. It ...more
Very easy to read . The concept of moats explained in a very lucid way , summarizes what to look for in a company and identify the types of moats . What is new came to know about the concept of wide and narrow moats . Lays down what doesn’t constitute moats like scale, efficient management , great products or market share . The key ratios to use and what ratios are applicable to a each industry are well explained . Very short and relevant stories bring out the concepts in a manner can understood
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A very interesting book to listen to. It has introduced and given me a deeper view on how to analyse moats around a business and what business moats are actually moats and not posing as one.
However I recommend picking up the physical copy to reference the points mentioned here. This is a book you will keep revisiting while building your wealth creation strategy.
Better designed for folks who are entering this mindset and for folks refining your strategy. It is a simple and quick inputs. It is ...more
However I recommend picking up the physical copy to reference the points mentioned here. This is a book you will keep revisiting while building your wealth creation strategy.
Better designed for folks who are entering this mindset and for folks refining your strategy. It is a simple and quick inputs. It is ...more
Concise summary of the sources of competitive advantage: (1) intangible assets (brands, patents, licenses), (2) high switching costs, (3) network effects, (4) cost advantages (scale in distribution, manufacturing or niche markets), location advantages, unique assets, process advantages). Valuation is largely based on (1) how large cash flows will be (growth), (2) the likelihood that those cash flows materialise (risk), (3) how much investment is needed (return on capital), (4) how long the
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This book is one of the best books I have ever read on stock valuation. The language is simple and easy to understand. The author has provided sufficient examples to illustrate the principles which makes the reading more seamless. Though the content is a little dated, the principles are true even today. I would definitely recommend this book as one of the must-reads for anyone starting up on their investment journey.
This was an interesting book - short, but with one main message: There are companies out there, with certain lasting advantages. These advantages can be regulatory, network, location, patent, brand-based, etc, but we'll call them companies with a moat - companies with a means to fend off competition economically. You should invest in these companies when you recognize them as being undervalued.
That's basically it! I didn't completely understand the valuation parts though.
That's basically it! I didn't completely understand the valuation parts though.
Awesome little book about "Moats", fun to read and packed with ideas!
"Great products, great size, great execution, and great management do not create long-term competitive advantages. They are nice to have, but they are not enough. The four sources of structural competitive advantage are intangible assets, customer switching costs, the network effect, and cost advantages."
"Great products, great size, great execution, and great management do not create long-term competitive advantages. They are nice to have, but they are not enough. The four sources of structural competitive advantage are intangible assets, customer switching costs, the network effect, and cost advantages."
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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.”
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“Even the Best Company Will Hurt Your Portfolio If You Pay Too Much for It.”
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