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46 of 51 people found the following review helpful
VINE VOICEon June 18, 2006
This book accomplishes two quite different things, both of which should be of use to the committed investor. First of all, it sets forth an investment philosophy in great detail. Second, it shows investors how to analyze securities themselves. In both those respects, it is on a par with "Securities Analysis" by Graham and Dodd (also highly recommended - I have also reviewed that book), although it is a much easier read.

In setting forth an investment philosophy, the book compares well with "Common Stocks and Uncommon Profits" by Phil Fisher and "The Intelligent Investor" by Benjamen Graham (both recommended). Whereas Fisher emphasized growth companies and management analysis and Graham emphasized earnings, Whitman and Shubik emphasize low price/book ratios. They support their position quite ably with examples and , where available, studies.

The Aggressive Conservative Investor also contains a good bit of information about securities analysis. While it is not as in-depth as "Security Analysis" (the Graham and Dodd classic), the chapters on financial accounting and GAAP are a must read, particularly since the book convincingly demonstrates that the utility of financial statements will differ depending upon the position of the person reviewing them.

Whitman and Shubik are most certainly value investors who focus on analyzing a particular company (as compared to the market as a whole, interest rate trends, etc.), although they also cover "asset conversion investing," which may involve investing in distressed companies. They make an excellent argument that, in many cases, companies with unencumbered assets may make excellent investments. They also freely take exception to accounting conventions that emphasize earnings, and they repeatedly demonstrate how earnings may be affected by accounting policies that are beyond the control (and arguably the understanding) of most investors, including me.

Another interesting thing about this book is that it covers different corporate constituancies (banks, bondholders, management, insurance companies, passive outside shareholders, etc.) and how their involvement affects and is affected by corporate activities in great detail. The book notes that even investors in common stock may have different objectives, and it discusses how these perspectives may affect the company over time.

The book also has an excellent discussion of sources of corporate disclosure, in order to take advantage of the company's public communications to understand it better. While I am generally aware of many of these sources, the book does a commendable job of explaining them in greater detail.

The Aggressive Conservative Investor does contain some numeric analysis that may be hard to follow, and it can't be called an "easy read," although it certainly is not as hard to read as "Security Analysis." Moreover, some of the information contained in the book is now outdated due to changes in the tax code. These are minor concerns to me, however, and I would highly recommend this book to anyone who is serious about investing.
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18 of 18 people found the following review helpful
VINE VOICEon June 5, 2007
After reading this book years ago, I was interested in reading it again for the new release. Though it is not really an updated main text version, it does have a new forward by Eugene Isenberg (current Chairman of Nabors Industries) and new introduction by the original authors of Martin Whitman and Martin Shubik. Irrespective, it was still an enlightening experience to go over the material again. Since the original printed edition, I believe Mr. Whitman's record speaks for itself, in that the "safe and cheap" methods espoused originally in The Aggressive Conservative Investor are good foundations to start, or extend, your investment education in what the authors call "the outside passive investor".

However, as some other reviewers have pointed out, this book is not your average investor book structured for easy reading with quick formulas. The book is for the more serious investor as its authors clearly state. For example, "In presenting our position, considerable space is devoted to describing the real world faced by both outsiders and insiders." Their point is that in understanding the viewpoints of both the insider, whether corporate management, the banker and/or financier, the directors, or the short-term trader, or that of the outside passive investor will help you along your way in understanding what may be happening in the market and why. Why? - because of the interested parties perspectives as they may temporarily have leverage over the other.

Though the book is a little more rough sailing because of this background perspective - to assist the future reader - (after reading the introduction) one may first want to start in Section 5 <Tools of Security Analysis>, then go back to the beginning and dig in a little more. This should help one read this book more like a traditional investment book. The two (2) case studies in the Appendix sum up the book with narratives of why some insiders (and outsiders) may act as they do.

As for the safe and cheap method, considerable time is spent with emphasis on the importance of the financial position of the security under consideration. This Financial-Integrity approach is detailed and viewed from all the players perspectives in the transaction of a security purchase (or seller) to emphasize the concept of the "guaranty". In addition, even though the authors do state their differences with the Graham & Dodd methods, I feel that in the end they are more connected at the hip than their stated differences may imply, or indicate.

All in, if you are willing to spend the time and do the work, whether reading annuals, 10-Ks, 10-Qs, then reading this book will assist you in becoming a better investor in your investing activities, but the trip is not recommend for the casual weekend reader.
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45 of 53 people found the following review helpful
on July 13, 1998
Marty Whitman is a master value investor who has been successful for 3 decades, though recently becoming known to the masses through his Third Avenue family of mutual funds. Anyone who has read some of his shareholder letters will recognize some of the concepts in the book, but they are presented in detail. This book teaches you to understand how "control" investors think, and to then learn how to evaluate annual and quarterly statements in a new light. Whitman is more than a value investor, of course, he is a vulture investor and proud of it. Though this book is as fresh today as it was in 1979, we await his new book eagerly for more wisdom from the master. Marty Whitman's approach is as different from Ben graham's as the Rolling Stones were from the Beatles! Both early rock bands from England, but clearly touched responsive chords in very different ways...If you can find this book, BUY IT!
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13 of 13 people found the following review helpful
on December 28, 2006
The most extraordinary part of The Aggressive Conservative Investor is that it tells the reader how minority investors can benefit by knowing and understanding how control investors make investment decisions.

If one is smart enough to realize how insiders and control investors made fortunes by taking advantage of the market cycles to do the arbitrage between private and public market, one will come to appreciate the beauty of the safe-and-cheap approach as detailed in this book.

I have come across a few negative comments on the book regarding the use of "out-dated" materials. This certainly does not take me by a surprise, as not everybody has 50 years of investment experience as Whitman does, so, naturally, not everybody can understand what "there is no new thing under the sun" means.
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12 of 12 people found the following review helpful
on January 23, 2010
I am a fan of value investing in all of its different variations, and so when I run across a book on the topic, particularly from a skilled practitioner, I buy it. I'll do more book reviews on value investing, but one of the first that I wanted to do was Value Investing, by Marty Whitman.

So, I start looking around for my copy, and I can't find it. Arrrgh, I can guess what happened. I lent it out, I can't remember who I lent it to, but the borrower never gave it back to me. Annoyed at myself, I do notice a book that was just as good, The Aggressive Conservative Investor, by Marty Whitman and Martin Shubik. Even better, it is back in print, after being out of print for 20+ years.

So, what's so great about the book? (Most of this applies to both books.) Marty Whitman has a strong "What can go wrong" approach. He realizes that he, and most other investors, will be outside passive minority investors. We only ride on the bus. The inside active control investors drive the bus, and if we are going to make money with reasonable safety, we have to understand the motives of those that control the companies. They benefit somewhat disproportionately from control. They receive wages and benefits that other shareholders do not receive, can gain cheap outside financing, and limit tax exposures, in addition to other benefits.

Like me, Whitman doesn't care much for modern portfolio theory. More notable for a value investor, he has a few criticisms for the traditional "Graham-and-Dodd" type of value investing.

* Typically, it works best for "going concern" situations, and not situations where activism could be necessary to unlock value. (Though, Graham did do things like that in his career; he just didn't try to teach amateurs about it.)
* He doesn't always stick to high quality companies, if enough information can be obtained about the target. Information allows for more risk to be taken.

There are four things that he insists on in equity investments:

1. Strong financial position
2. Honest management that is creditor-aware and shareholder-oriented
3. Adequate disclosure of information relevant to the success of the company
4. The stock can be bought for less than the net asset value (adjusted book value) of the firm.

If you have these items in place, you won't lose much, and if the management team makes value enhancing decisions, one can make a lot of money on the stock.

Whitman places a lot of stress on reading through the documents filed with the SEC. They may not be perfect, but managements know that they need to provide adequate disclosure of material information, or they could be sued. A lot gets revealed in SEC filings, and not every investor sees that.

He also places great stress on understanding the limitations of the accounting, whether under GAAP, Tax, or any other basis. Comparing the various accounting bases can sometimes illuminate the true financial well-being of a company. (Note: this is what killed me on Scottish Re. I should have questioned the GAAP profitability, when they never paid taxes.) He lists the underlying assumptions behind GAAP accounting, and explains how they can distort the estimation of economic value. Honestly, it is worse today in some ways than when he wrote the First Edition in 1979. GAAP accounting is more flexible, and less comparable across companies today.

Marty Whitman looks for situations where resources in a company can be used in a better manner, creating value in the process.

* Is the company too conservatively financed? Perhaps borrowing money to buy back stock, or issuing a special dividend could unlock value.
* Are there divisions that are undermanaged, or would fit better in another company?
* Are management incentives properly aligned with shareholders?
* Would the company be better off going private?
* Is government regulation a help or a hindrance? (Barriers to entry)
* Analyzing corporate structures for where the value is.

Beyond that, he explains how to calculate net asset values, as distinct from book values. He describes the problems with earnings as a value metric. He explains the value of dividends and other distributions. He also explains when it can make sense to own companies that are losing money. (Underlying values are growing in a way that the tax accounting basis does not catch.)

It's a good book. Together with Value Investing, it gives you a full picture of how Marty Whitman thinks about value investing. He is one of the leading value investors of our time, but he has spent more time than most on the underlying theory. For those who want to think more deeply about value investing, Marty Whitman is a highly recommended read.
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5 of 5 people found the following review helpful
on January 19, 2013
After hearing lots of ranting and raving about Marty Whitman, I decided to pick up a copy of this book. (From the library. Sorry Amazon!)

In a nutshell: It's not worth it.

I have a lot of respect for Mr. Whitman, but this book is just awful. It's unnecessarily long. For example, the latter fifth of the book is information essentially copy-pasted from other sources, such 10-Ks and proxies, with nothing more than a smattering of written-by-Marty-Whitman paragraphs here and there. And these paragraphs don't really add all that much.

The book's also nowhere near to the point. It meanders along from subject to subject without touching on *any* useful core concepts. It kind of just talks, and talks, and talks for some 400 plus pages (if you include the prefix and appendices), and I learned absolutely *nothing* new, conceptually, from the entire thing.

Did I mention I've read accounting textbooks that were more fun to read than this?

If you're a beginner investor, pass on this. It's going to be a tough read. And even if you could understand everything, you probably wouldn't get much out of it. I recommend Joel Greenblatt's You Can Be a Stock Market Genius and Bruce Greenwald's Value Investing instead, in that order. Greenblatt's book is incredibly readable and full of great information. Greenwald's book is a little tougher for the beginner, but you'll learn lots from it.

If you're a more experienced investor and want to read this because it's a "classic", resist the temptation. I wish I had.
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4 of 4 people found the following review helpful
on December 24, 2007
This book was written by two (now wildly successful) fund managers. The prose and style is clearly mid-70s, but the advice is still sound.

In particular, I liked the contrarian recommendation to buy companies w/ LOW margins. That accompanied with mean reversion of sectors gives you plenty of bang for your buck.

The differentiation of economic and accounting earnings - I have yet to see this descirbed anywhere else. I also have yet to see a sell-side analyst understand this concept.

There are also many good real world examples that we find occuring again and again and again and again....this alone makes it worth the read.

That being said, getting through this was a slog. It felt too much like a dry text book. Maybe I am a victim of flashier editing that is in vouge these days....
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5 of 6 people found the following review helpful
on August 14, 2009
This is a very good book, but I have to warn readers that it is mainly for more advanced investors. In this book, the author lays the foundation for his investment philosophy and educates readers about analyzing individual securities. This book is an investment classic and will be read by investors for decades, because good investing is good investing.

The part that I particularly enjoyed was when the author described how different investors, specifically control investors, have different agendas and how it affects the company and other smaller investors. I enjoyed reading this book, and if you are a serious investor you should read it, too.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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4 of 5 people found the following review helpful
on October 22, 2010
This book presumes familiarity with accounting and basic investing terminology; I would not recommend it for a new investor. On the other hand, it is not a technical book, and will offer limited value to the experienced and the financially savvy.

It does present the perspective and basic analytical framework that has been so rewarding to Third Avenue. Whitman and Shubik present the "financial-integrity" approach, which can be summarized in four principles:
1. Management and other influential interests should be relatively reliable.
2. Information necessary for an investment thesis should be accessible.
3. Interests should be supported by high quality assets with limited associated liabilities.
4. Value should exceed price by a worthwhile margin.

However, I only voted three stars because I felt that the book meandered into unnecessary topics, such as an extensive discussion of the ideal role of GAAP. While accountants may find the chapter(s) interesting, investing students might find the topic to be impractical.

With the above caveats in mind, this book is worth purchasing for the new analyst who has already begun to form an investing methodology, but who is willing to consider the experience and wisdom of a seasoned veteran.
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21 of 30 people found the following review helpful
on March 19, 2006
This book disappointed me after reading Martins letters. Although this book provides a very different angle on value investing and has some useful ideas the writing style is poor and lacks clarity. There are much better books on analysing companies I suggest Financial Statement Analysis by Martin Fridson and Fernando Alvarez.
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