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Index
Title Page
Copyright Page
Foreword
Acknowledgments
Introduction
It’s the Business that Matters
The Long-Term Approach
Having the Courage of Your Convictions
Let’s Get Started
Chapter 1 - The Five Rules for Successful Stock Investing
Do Your Homework
Find Economic Moats
Have a Margin of Safety
Hold for the Long Haul
Know When to Sell
Investor’s Checklist: The Five Rules for Successful Stock Investing
Chapter 2 - Seven Mistakes to Avoid
Swinging for the Fences
Believing that It’s Different This Time
Falling in Love with Products
Panicking When the Market Is Down
Trying to Time the Market
Ignoring Valuation
Relying on Earnings for the Whole Story
Investor’s Checklist: Seven Mistakes to Avoid
Chapter 3 - Economic Moats
Evaluating Profitability
Building an Economic Moat
How Long Will It Last?
Industry Analysis
Investor’s Checklist: Economic Moats
Chapter 4 - The Language of Investing
The Basics
Where the Money Goes
Practical Financials—The Statements in Use
Investor’s Checklist: The Language of Investing
Chapter 5 - Financial Statements Explained
The Balance Sheet
The Income Statement
The Statement of Cash Flows
Conclusion
Investor’s Checklist: Financial Statements Explained
Chapter 6 - Analyzing a Company—The Basics
Growth
Profitability
Financial Health
The Bear Case
Conclusion
Investor’s Checklist: Analyzing a Company—The Basics
Chapter 7 - Analyzing a Company—Management
Compensation
Character
Running the Business
Investor’s Checklist: Analyzing a Company—Management
Chapter 8 - Avoiding Financial Fakery
Six Red Flags
Seven Other Pitfalls to Watch Out For
Investor’s Checklist: Avoiding Financial Fakery
Chapter 9 - Valuation—The Basics
Paying Up Rarely Pays Off
Using Price Multiples Wisely
Say Yes to Yield
Investor’s Checklist: Valuation—The Basics
Chapter 10 - Valuation:—Intrinsic Value
Cash Flow, Present Value, and Discount Rates
Calculating Present Value
Fun with Discount Rates
Calculating Perpetuity Values
Margin of Safety
Conclusion
Investor’s Checklist: Valuation—Intrinsic Value
Chapter 11 - Putting It All Together
Advanced Micro Devices
Biomet
Conclusion
Chapter 12 - The 10-Minute Test
Does the Firm Pass a Minimum Quality Hurdle?
Has the Company Ever Made an Operating Profit?
Does the Company Generate Consistent Cash Flow from Operations?
Are Returns on Equity Consistently above 10 Percent, with Reasonable Leverage?
Is Earnings Growth Consistent or Erratic?
How Clean Is the Balance Sheet?
Does the Firm Generate Free Cash Flow?
How Much “Other” Is There?
Has the Number of Shares Outstanding Increased Markedly over the Past Several Years?
Beyond the 10 Minutes
Chapter 13 - A Guided Tour of the Market
Where to Look
Conclusion
Chapter 14 - Health Care
Economic Moats in Health Care
Pharmaceuticals
Generic Drug Companies
Biotechnology
Medical Device Companies
Health Insurance/Managed Care
Investor’s Checklist: Health Care
Chapter 15 - Consumer Services
Companies We See Every Day
Restaurants
Retail
Conclusion
Investor’s Checklist: Consumer Services
Chapter 16 - Business Services
Outsourcing Trend
Economic Moats in Business Services
Technology-Based Businesses
People-Based Businesses
Hard-Asset-Based Businesses
Investor’s Checklist: Business Services
Chapter 17 - Banks
It’s All about Risk
Managing Credit Risk
Selling Liquidity
Managing Interest Rate Risk
Economic Moats in Banks
Hallmarks of Success for Banks
Investor’s Checklist: Banks
Chapter 18 - Asset Management and Insurance
Asset Management
Life Insurance
Property/Casualty Insurance
Investor’s Checklist: Asset Management and Insurance
Chapter 19 - Software
Segments of the Software Industry
Economic Moats in the Software Industry
Software Accounting 101
Red Flags
Hallmarks of Success for Software Companies
What’s Not to Like about Software?
Conclusion
Investor’s Checklist: Software
Chapter 20 - Hardware
What Drives the Hardware Industry
Hardware Industry Dynamics
Economic Moats in Hardware
Hallmarks of Success for Hardware Companies
Investor’s Checklist: Hardware
Chapter 21 - Media
How Media Companies Make Money
Economic Moats in Media
Publishing Profits
Broadcasting and Cable
Investing in the Entertainment Industry
Hallmarks of Success in the Media Sector
Risks in the Media Sector
Investor’s Checklist: Media
Chapter 22 - Telecom
Telecom Economics
Economic Moats in Telecom
Hallmarks of Success in Telecom
Conclusion
Investor’s Checklist: Telecom
Chapter 23 - Consumer Goods
How Companies Make Money in Consumer Goods
Key Strategies for Growth
What’s Not to Like in Consumer Products
Economic Moats in Consumer Goods
Hallmarks of Success in Consumer Goods
Conclusion
Investor’s Checklist: Consumer Goods
Chapter 24 - Industrial Materials
The Problem with Cyclicality
Economic Moats in Basic Materials
Economic Moats in Industrial Materials
Hallmarks of Success in Industrial Materials
Red Flags
Finding Opportunities in Industrial Materials
Investor’s Checklist: Industrial Materials
Chapter 25 - Energy
From the Ground
To the Pipelines
To the Refineries
To the Consumers
Providing the Services
The Impact of Commodity Prices
Economic Moats in Energy
Hallmarks of Success for Energy Companies
Risks in the Energy Sector
Conclusion
Investor’s Checklist: Energy
Chapter 26 - Utilities
Electricity Primer
Regulation, Regulation, Regulation
Financial Characteristics of Utilities
Hallmarks of Success for Utility Companies
Risks in the Utilities Sector
The Big Picture
Investor’s Checklist: Utilities
Appendix
Recommended Readings
Morningstar Resources
Index
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