Financial professional Dorsey shows readers the secret to selecting excellent stocks. Divided into six comprehensive parts, this reliable resource guides readers down the path to understanding and discovering what an economic moat is and how to best select a company using this method.
Morningstar's stock rating system is based on a fundamental and disciplined approach to selecting companies. The system is not strictly a value approach nor is it strictly a growth approach. The goal is to select excellent companies with a strong "moat" that feature good growth fundamentals mixed with a fair price. Sounds like a pretty selective approach? Well, yes it is. But, it is also what makes the system so powerful and so successful. Morningstar's stock rating system is the basis for their Stock Investor newsletter and their flagship rating service - featured in the annual book, Stocks 500. This star system has had exceptional results. Since its inception, the Morningstar "5 Star" rated stocks have nearly doubled the return of the S&P.
Here, in simple, straight forward language, Dorsey shows readers the secret to selecting excellent companies.
From The Publisher:
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 Dorsey—the 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 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 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.
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.
About The Author:
Pat Dorsey (Chicago, IL) is director of stock research for Morningstar. Dorsey is the author of The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market and The Little Book that Builds Wealth: The Knockout Formula for Finding Great Investments. He joined Morningstar in 1998 as a senior equity analyst covering the telecommunications equipment and computer hardware industries. He played an integral part in the development of the Morningstar Rating(TM) for stocks, as well as Morningstar’s economic moat ratings. Before joining Morningstar, Dorsey wrote for the investment newsletter Personal Finance and worked for Merrill Lynch and A.G. Edwards as a registered sales assistant. Dorsey holds a master’s degree in political science from Northwestern University and a bachelor’s degree in government from Wesleyan University. He also holds the Chartered Financial Analyst (CFA) designation. Dorsey appears weekly on the “Bulls & Bears” show on the Fox News Channel.