Applied Value Investing: The Practical Application of Benjamin Graham and Warren Buffett's Valuation Principles to Acquisitions, Catastrophe Pricing and Business Execution [Hardcover]

Jr. Joseph Calandro (Author)

Book Description

ISBN-10: 0071628185 | ISBN-13: 978-0071628181 | Publication Date: July 24, 2009 | Edition: 1

Since Benjamin Graham fathered value investing in the 1930s, the method of analysis has spawned a large number of highly successful investors, such as Graham’s own former student and employee, Warren Buffett, who is regarded as one of the most successful investors of modern times.

Over the years, numerous books have been published on Benjamin Graham’s approach. Most of these books present different interpretations of value investing and are generally introductory based. Until now, there has not been an advanced hands-on guide for investors and executives who may want to apply the powerful value investing discipline outside of stocks and bonds.

Applied Value Investing takes the same time-proven approach Graham introduced with David Dodd in their 1934 masterpiece, Security Analysis, and extends it in a variety of unique and practical ways—including mergers and acquisitions, alternative investments, and financial strategy.

This in-depth guide shows financially sophisticated readers how to use value investing in a macroinvesting framework and how to apply it to the emerging area of super catastrophe valuation. It illustrates how to put value investing to use with case studies on:

• Eddie Lampert’s acquisition of Sears
• Warren Buffett’s acquisitions of GEICO and General Reinsurance Corporation
• The recent “new economy” boom and bust, and its aftermath
• The underwriting of the Pepsi Play for a Billion sweepstakes

Applied Value Investing also demonstrates how to incorporate the cornerstones of valuation into an integrated business framework that can be used to assess and manage a franchise (or a firm operating with a sustainable competitive advantage).

In addition to its cutting-edge applications of value investing principles, Applied Value Investing sets itself apart by drawing on material published in leading academic journals to form the foundation of its presentation. However, value investing is inherently practical, and this comprehensive resource provides helpful guidance for successfully implementing value investing strategies in the real world.

To profit like the masters you have to think like them. Applied Value Investing can open new doors to value creating opportunities.

Editorial Reviews

From the Back Cover

Brand-new ways to apply the investing ideas of GRAHAM and BUFFETT

“This thought-provoking work takes value investing to the next level.”
—Seth A. Klarman, President, Baupost Group, L.L.C., Lead Editor of Graham and Dodd’s Security Analysis, 6th Ed.

“After 75 years, Graham and Dodd remains the true North Star for those seeking the Rosetta Stone to unlock values. Professor Joseph Calandro adopts Graham and Dodd’s fundamental premises and uses them to focus on new dynamics.”
—Mario J. Gabelli, CFA, Chairman and CEO, GAMCO Investors, Inc.

“Calandro’s application of Graham and Dodd principles outside the traditional realm of value investing involves multi-disciplinary thinking, a necessary skill for constructively framing and reframing the investment landscape in today’s chaotic world.”
—Mitchell R. Julis, Co-Chairman and Co-CEO, Canyon Partners, L.L.C.

“Applied Value Investing is the most important business book of our time.”
—Dr. John J. Sviokla, Vice Chairman, Diamond Management & Technology Consultants, and former Associate Professor, Harvard Business School

“Calandro’s groundbreaking book integrates [key] lessons into a holistic and practical business framework, which can be used to either assess or manage a business.”
—Robert M. Randall, Editor, Strategy & Leadership, and coauthor of The Portable MBA in Strategy

“If executives will adopt the discipline that Joseph Calandro lays out, they will avoid many, many costly mistakes.”
—Paul B. Carroll, coauthor of Billion-Dollar Lessons

“A must-read for all Graham and Dodd followers, and valuation practitioners.”
—Patrick Terrion, Principal, Founders Capital Management, and author of The Company You Keep

“A useful addition to every value investor’s library.”
—Bruce Greenwald, Robert Heilbrunn Professor of Finance and Asset Management, Columbia Business School

About the Author

Joseph Calandro, Jr., is the enterprise risk manager of a global financial services firm. He previously taught value investing and risk management courses in the MBA program at the University of Connecticut and worked as a financial management consultant with IBM Global Services.

Product Details

• Hardcover: 304 pages
• Publisher: McGraw-Hill; 1 edition (July 24, 2009)
• Language: English
• ISBN-10: 0071628185
• ISBN-13: 978-0071628181
• Product Dimensions: 9.2 x 6.3 x 1 inches
• Shipping Weight: 1.3 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (23 customer reviews)
• Amazon Best Sellers Rank: #285,732 in Books (See Top 100 in Books)

More About the Author

Joseph Calandro, Jr., is the enterprise risk manager of a global financial services firm. Previously he was a financial management consultant who worked on a variety of valuation, financial strategy, and risk management engagements. He was also a part-time finance professor at the University of Connecticut, where he taught value investing and risk management in the school's MBA program. Joe has published widely across disciplines in a variety of journals including the Journal of Alternative Investments, Strategy & Leadership, the Risk Management & Insurance Review, and Measuring Business Excellence, and he has presented papers at conferences held in the United States, United Kingdom, and Canada. Some of his academic papers are available for download at this Social Science Research Network author's page: http://ssrn.com/author=357310

Customer Reviews

Most Helpful Customer Reviews

16 of 17 people found the following review helpful:

5.0 out of 5 stars Value Investing without the Hyperbole--at last!, June 2, 2010

By 

Mark Brockmeier (Boston, MA) - See all my reviews
(REAL NAME)   

This review is from: Applied Value Investing: The Practical Application of Benjamin Graham and Warren Buffett's Valuation Principles to Acquisitions, Catastrophe Pricing and Business Execution (Hardcover)

Joe Calandro solidly lays out the case for investing building historically on Graham and Dodd but recognizing that today's market practitioners face an increasingly sophisticated capital market structure. As a student of and expert in risk assessment, Calandro makes the case that patient, value-based investing in the updated modern Graham-Dodd model would serve corporations well in pondering their M&A activity. He lays out how even the world's most admired holding company, Berkshire-Hathaway, had success with GEICO but made mistakes in their valuation profile for arguably their most important acquisition, General Reinsurance.

Opportunities to value the key factors that seemingly drive corporations' M&A--franchise, growth, and margin of safety--are both values and risks, and should be viewed as such. But the upside potential must be carefully scrutinized and, as Calandro so poignantly discusses throughout his book, brought down the understandable, calculable factors that can be widely socialized and agreed. To do otherwise simply nourishes the hyperbole of the proposed merger and perpetuates that they hunch-based `synergy' model of merger will work. Really. This time the synergies will come true. For sure. We are thankful for Applied Value Investing and its ability to ignore hyperbole at the individual company level and particularly in the current market crises, whether it is in currency markets, real-estate markets, bond markets, or equity markets.

So stop wondering if value investing is passe and the world has moved onto a more 'mature' model. A century ago, no wiser words were said: `those who cannot remember the past, are condemned to repeat it'...sage advice in this era of uncertainty and market disruption. This book is a MUST READ for serious investors and those who assess risk.

15 of 16 people found the following review helpful:

5.0 out of 5 stars Value Investing is a winner, October 13, 2009

By 

Jackson Russell - See all my reviews

This review is from: Applied Value Investing: The Practical Application of Benjamin Graham and Warren Buffett's Valuation Principles to Acquisitions, Catastrophe Pricing and Business Execution (Hardcover)

The valuations presented in this book were both comprehensive and true to the modern Graham and Dodd approach. Each level of value was thoroughly analyzed before a final position was formulated. The author's assumptions were transparent and, most importantly, he identified areas that would require expert input to validate.

I found it particularly interesting how this approach worked so well with Buffett's GEICO and Gen Re acquisitions. The value framework presented in this book clearly identified some of those deals' value and risk drivers in a unique and useful way, which is significant as I am a 20+ year veteran of the insurance industry and appreciate his perspectives. Mr. Calandro's insights were very helpful and will serve as a guidepost for future deals.

This book also extended value investing into areas such as catastrophe pricing and macro-investing, and their impact on business strategy where a value approach is clearly needed. I found Mr. Calandro's writing style and explanations to be the right mix of technical know-how and easy to understand explanations of what could be a very complex topic.

Very strongly recommended.

21 of 24 people found the following review helpful:

5.0 out of 5 stars Calandro Builds on the Ideas of Graham and Buffett, September 7, 2009

By 

Bill O'Farrell - See all my reviews

This review is from: Applied Value Investing: The Practical Application of Benjamin Graham and Warren Buffett's Valuation Principles to Acquisitions, Catastrophe Pricing and Business Execution (Hardcover)

I have read many books on investing and Berkshire in particular but this is one of the few that truly captures and brings to life the key value investing concepts made famous by Graham and Dodd and Warren Buffett. Each chapter builds on the prior chapters in a logical manner and the case studies are great ways to explore the material.

In addition to the fresh insight, this book is a rarity in another way - a well-written and engaging book on finance. The concepts are clearly conveyed for the beginning investor but the material is so complete that even the most seasoned investor can gain from reading this book.

Calandro also takes the value investing concepts beyond their normal confines and explores how they can be applied to such things as M&A and catastrophe risk pricing. This is where the book really distinguishes itself from the pack. These new insightful twists on the tenants of value investing are thought-provoking and very valuable. It makes Applied Value Investing both an investment book and a management book at the same time.

I highly recommend this book.