The Little Book That Builds Wealth: The Knockout Formula for by Pat Dorsey

By Pat Dorsey

Within the Little e-book That Builds Wealth, writer Pat Dorsey—the Director of fairness learn for top self sustaining funding study supplier Morningstar, Inc.—reveals why aggressive merits, or monetary moats, are such robust symptoms of serious long term investments and examines 4 in their commonest assets: intangible resources, expense merits, customer-switching expenses, and community economics. alongside the way in which, he skillfully outlines this confirmed procedure and divulges how one can successfully use it on your individual funding endeavors.

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Extra resources for The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments (Little Books. Big Profits)

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In fact, if a company’s success seems to be based on being leaner and meaner than its peers, odds are good that it operates in a very tough and competitive industry in which efficiency is the only way to prosper. Being more efficient than your peers is a fine strategy, but it’s not a sustainable competitive advantage unless it is based on some proprietary process that can’t be easily copied. Talented CEOs are fourth in our parade of mistaken moats. A strong management team may very well help a company perform better—and all else equal, you’d certainly rather own a company run by geniuses than one managed by also-rans—but having a smart person at the helm is not a sustainable competitive advantage for a wide variety of reasons.

The other company does not have a moat, which means that returns on capital will likely plummet as soon as competitors move in. The company with the moat is worth more today because it will generate economic profits for a longer stretch of time. When you buy shares of the company with the moat, you’re buying a stream of cash flows that is protected from competition for many years. It’s like paying more for a car that you can drive for a decade versus a clunker that’s likely to conk out in a few years.

08carat, ideal-cut diamond with G color and VS1 clarity mounted in a platinum band sold for $13,900 from Tiffany. A diamond ring of the exact same size, color, and clarity, a similar cut, and a platinum band sold for $8,948 from Blue Nile. indd 31 1/26/08 3:07:00 AM [32] T H E L I T T L E B O O K T H AT B U I L D S W E A LT H is a luxury brand that would more logically be able to command a premium—USG sells drywall, about the most pedestrian product imaginable. Moreover, USG’s wallboard is basically the same as its competitors’.

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