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The Five Rules for Successful Stock Investing: Morningstar's Guide


racemize
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Just finished reading:

 

[amazonsearch]The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market[/amazonsearch]

 

Although it has a terrible title, it is probably one of the best introductions to value investing that I have read.  It starts out covering all of the basic topics: research, moats, margin of safety, long term holding, selling.  It also gives several mistakes to avoid in investing. 

 

After going through that, it goes through basic accounting and financial statements with several examples.  It also points out several accounting tactics to look out for. 

 

It wraps up these sections with valuation and intrinsic value, with examples.  Finally, it covers several industries with information on what to look out for. 

 

Overall, I would recommend this book first (or close to it) for people getting into investing.

 

 

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Seem to remember discussing this book a few months back so there's probably already a thread...

 

I remember the first half was DCF stuff, not extremely useful.  I wish he would have spent a little more time with different valuation techniques.  Dorsey and DCF reminds me of the phrase "when all you have is a hammer everything looks like nail".

 

The second half is the most valuable portion of the book, Dorsey goes through different industries and talks about the key metrics and key drivers for each industry.  Each of those chapters is probably ten pages long or so and can be read pretty quickly.

 

 

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  • 7 months later...

Just read the first part of the book (first 190-ish pages) today and I agree that it's mainly a book for beginners. But I am taking some small points into my checklist of things to consider (on accounting tricks and one or two on management). Some chapters aren't that useful (ex. DCF chapter) or don't have enough (if any) nuance. Most chapters (for ex. the one on moats) are way too short.

 

Maybe the second part of the book offers more value.

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Thank you for the tip Packer, I'll look into it. I've already read 'Competition Demystified' this year but plan to read as much as possible on economic moats as I believe it's a very crucial issue. I'd love to discover new 'hidden champions' in the small cap spectrum one day but understand that is extremely hard to do and often requires a lot of industry knowledge. I'm especially intrigued by companies like WD-40 that can somehow corner their niche market.

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