The little book that builds wealth (Pat Dorsey)

Proposes a theory that the best investments are the companies with economic moats because they produce sustainable high returns. Gives advice on how to find them:

• What makes a moat:
  • Intangible assets: patents, brands, licenses,
  • Customer switching costs,
  • Network effects: value of product increases with more users,
  • Cost advantages: cheaper processes, location, unique resources.
• What is not enough:
  • Great products,
  • Great size (although sometimes it might, e.g. niche monopoly),
  • Great execution,
  • Good management (although it's great to have and they can produce moats).
• Moats can get eroded:
  • Technological change (can lead to losing cutting edge),
  • Expansion into sectors where we have no moat,
• Finding moats:
  • Some industries are better: e.g. auto parts, asset management, software,
  • Check return on capital record; if it's good, think of the reason and if it can be maintained.
• Valuation matters.