The Little Book That Builds Wealth

Wiley has a series of books in in their...."Little Book Big Profits"

• The Little Book that Beats the Market/Joel Greenblatt
  
• The Little Book of Value Investing/Christopher Browne
  
• The Little Book of Common Sense Investing/John Bogle
  
• The Little Book that Makes you Rich/Louis Navellier
  
• The Little Book that Builds Wealth/Pat Dorsey

There is one thing that I've come to learn is that these books are definitely folks "talking their book". I don't say that in a derisive way at all. There are many types of successful investing, and understanding the various cornerstones of different modalities is useful in helping one find his/her own style.

I wanted to share with you some comments on the most recent book in the series, The Little Book that Builds Wealth, by Pat Dorsey of Morningstar.

The hook for the book is the importance of looking for economic moats of companies. He chooses the categories of intangible assets, customer switching costs, the network effect and cost advantages. Even more telling was his describing what IS NOT an economic moat--things like great products, size, management and execution. There are some very cogent gems in this book. For example: " A company's value is equal to all the cash it will generate in the future. That's it." Sure, I knew, that but seeing it written so starkly was refreshing AND a good reminder.

The book is very accessible. It is well organized, clearly written, chapter "bottom-lines" with plenty of tangible examples. I was glad to see that there were chapters on right buying and right selling. Too often the entry and exit guidelines are glossed over at the expense of investor returns. Nevertheless, Dorsey is an advocate of long term holding--years, not months.

What am I going to do differently in my own investing approach having read this book? I'm going to make a concerted effort to identify moats AND appreciate their contribution to a company's valuation. In fact, in looking at a few of the examples, I was struck that MY FAILURE to recognize economic moats resulted in my thinking a stock was too richly valued, when in fact the economic moat was being appropriately valued more richly than counterparts. Accordingly, (and I recognized some of these companies about which I thought this) this recognition of economic moats (that goes beyond what we generally think as the thing that generates the premium--great products etc.) allowed me to resolve that perplexion.

I created a Mind Map of the book which you can find here. Would I recommend the book. Yes, I would for investors not traders.