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The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments Hardcover – Illustrated, March 5 2008
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"Pat Dorsey...discusses in an easy to read style why economic moats are such great indicators of long term performance." (Pensions World, October 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 Dorseythe 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 valuationbecause even a wide-moat company will be a poor investment if you pay too much for its sharesand illustrates the issues addressed through case studies that apply competitive analysis to some well-known companies.
Although the moat concept is not a new oneit was made famous by Warren Buffettthe 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.
- Publisher : Wiley; 1st edition (March 5 2008)
- Language : English
- Hardcover : 224 pages
- ISBN-10 : 047022651X
- ISBN-13 : 978-0470226513
- Item weight : 260 g
- Dimensions : 12.95 x 2.54 x 18.03 cm
- Best Sellers Rank: #144,686 in Books (See Top 100 in Books)
- #790 in Introduction to Investing (Books)
- #799 in Popular Economics (Books)
- #1,833 in Personal Finance (Books)
- Customer Reviews:
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Top reviews from Canada
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Pat Dorsey is one of my favorite investors, he shares insights into his process, and even shares some of the stock that he singled out using the process of 'Moat Identification'.
This book is a value investing book, and it preaches looking for special companies that have an advantage, which is then called a Moat. It could be brand name advantage, size and scale, net work, switching cost, a special license from a government... He review each 'moat' and then gives clear examples of what would be a brand name with a moat, and which would not. For instance.. would you pay extra for a Sony, if something equivalent is available cheaper from Hitachi or Samsung? Yet we perhaps would go out of our way for a coke, and Coca Cola the company has an amazing distribution network which makes it hard to copy or become competition with.
Each of these moat companies makes higher returns than average.. perhaps 15-30% on the Capital Employed (similar to return on investment)... and can do so for many years without the threat of competition.
We all would like to have these in our portfolio, however... most of these will not be offered at a discount, so you have to look for the companies and wait until they do go on sale. (Many value investors do this, including Warren Buffet, and even Mr. Templeton used to do it)
Now.. can you do it?
Even if this is not the path you choose to take to invest.. this information is certainly worth knowing.. just in case you happen to stumble on such an investment you will be able to recognize it and then buy it and let it grow.
Top reviews from other countries
Good companion books for investing like Warren Buffett are:
Invest Like Warren Buffett: Powerful Strategies for Building Wealth
Invest With The House: Hacking The Top Hedge Funds