How do you pick stocks? Do you pay attention to earnings? Chart patterns? Growth potential? Your Uncle Morty? Instead of all that, use the same basic system that investment guru Warren Buffett perfected: Look for solid profitable companies that own a piece of the market, buy their stock and hold it a long time. Morningstar, the investment research company, uses the same approach to analyze and rate stock values. Its director of equity research, Pat Dorsey, explains its stock analysis system in this small volume. The stock selection system calls for seeking companies with protected unique advantages, called “economic moats.” What sounds straightforward in theory may not be as easy in practice: Finding a structurally protected stock today is not necessarily a simple stroll across the drawbridge. Still, getAbstract finds Dorsey’s presentation succinct and readable, and recommends it to investors who are not yet familiar with value investing and similar approaches.
In this summary, you will learn
- How to use “the best” Wall Street investment strategy;
- What an “economic moat” is;
- What a moat’s four primary sources are;
- How a moat protects a company’s long-term market franchise; and
- Why return on capital is vital to investors.
About the Author
Pat Dorsey, CFA, is Director of Equity Research at Morningstar. He helped develop the company’s stock rating system.