The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments by Morningstar's Pat Dorsey

Published by Wiley, March 08

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. In The Little Book That Builds Wealth, author Pat Dorsey, 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.

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, Dorsey discusses step by step 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 the reader how to recognise 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 valuation — because even a wide-moat company will be a poor investment if you pay too much for its shares — and illustrates the issues addressed through case studies that apply competitive analysis to some well-known companies.

Although the moat concept is not a new one — it was made famous by Warren Buffett — the modern-day investor can benefit from what it has to offer. With The Little Book That Builds Wealth as their guide, readers will quickly discover why moats should be an integral part of their analytical investment toolkit and learn how to leverage this approach to build a portfolio of high-performance stocks.

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About the author
Pat Dorsey, CFA (Chicago, IL) is Director of Equity Research at Morningstar, Inc. He played an integral part in the development of the Morningstar Rating™ for stocks, as well as Morningstar’s economic moat ratings. Dorsey is also the author of The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market (Wiley). He holds a master’s degree in political science from Northwestern University and a bachelor’s degree in government from Wesleyan University. Please visit www.findingmoats.com.

ISBN: 978-0-470-22651-3;  Hardback; £10.99/€14

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