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The Little Book That Builds Wealth
Book

The Little Book That Builds Wealth

The Knockout Formula for Finding Great Investments (Little Book Big Profits)

Wiley, 2008 plus...


Editorial Rating

6

Recommendation

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.

Take-Aways

  • Your optimal stock investment strategy: When the price is right, buy a sound company with good profits that it can sustain.
  • Look for companies with a strong return on capital.
  • Seek a company with an “economic moat,” that is a notable structural marketplace advantage.

About the Author

Pat Dorsey, CFA, is Director of Equity Research at Morningstar. He helped develop the company’s stock rating system.