Customer Reviews

How to Think Like Benjamin Graham and Invest Like Warren Buffett

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Although the definitive popular book on Benjamin Graham and Warren Buffett remains to be written, this excellent work is certainly the state-of-the-art in this area. For those who do not have the time or inclination to read the writings and speeches of these important investment thinkers, you get the key kernels of wisdom in action-oriented doses here. This is the first book I have read that gives the stock investor who wants to outperform the market averages a sense of what is involved in order to have a chance. The examples of how to apply these methods to companies like General Electric, Coca-Cola, Microsoft, and internet retailers are very helpful. I thought this book was much more valuable in every way than Buffettology.

Both Graham and Buffett see buying stock as being the same as buying a whole company. The analytical methods involved are similar to those used by companies thinking about making an acquisition, except there is no need to consider what the joint operating benefits of the companies will be. The strength of this approach to stock investing is that if stock values for a company fall too low another company or group of cash-flow-oriented investors will acquire the whole company. In the long run, stocks should not fall too far below their intrinsic value (a Graham concept) as cash flow generators.

The book is organized into three sections. The first looks at whether the stock market is efficient or not. If it is, you cannot beat it. If it is not, you can beat it by investing where it is not efficient. The evidence here summarized estimates that the stock market is at least 20 percent inefficient and becoming more so. I am aware of a number of studies showing other kinds of inefficiency that Professor Cunningham does not cite. My own personal view is that the stock market is not very efficient at all, but is relatively predictable within a band of probability.

A particular strength of this section is in creating a summary of many of the arguments for stock market efficiency and inefficiency. Trust me. Unless you really love reading this kind of research (which I happen to), you will be better off reading the summaries here rather than the originals.

The second section discusses how to outperform the stock market. The best part of this section is an extremely well done parable about a man who wants to sell his apple tree. He is approached by many different types of potential purchasers, and they offer wildly varying prices. You get the interior logic of how each price is arrived at in a way that allows you to see the fundamental weaknesses and strengths of each approach. Nicely done!

The heart of this section emphasizes the familiar Graham and/or Buffett (their philosophies do not coincide, but rather partially overlap) concepts of sticking to what you know well, having a margin of safety, and doing your homework. I particularly liked the detailed description of how to determine where you have a knowledge edge that allows you to potentially have an advantage as a stock investor. The cautions against overestimating what you know are very well done.

The third section looks at the role of company management and boards of directors. It debunks a lot of the popular thinking about the importance of good governance. As Warren Buffett often emphasizes in his annual letters to shareholders, you should invest only with people you "like, trust, and admire." A CEO with a weakness (particularly a lack of integrity) can quickly tank your investment before you can do anything about it. Certainly, I have been sorry a number of times when I have not followed that rule. I certainly subscribe to it now. Every management will make mistakes. Only highly focused and capable ones will notice that they have and work on rectifying the errors rather than trying to explain why there really is no problem.

If you read this book carefully, it will convince you that outperforming the stock market is a pretty hard thing to do unless you have a great deal of knowledge about public companies and unusually good access to company managements. I think describing what needs to be done is the most eloquent argument that I have seen for why the average investor should be in indexed mutual funds for the stock portion of her or his portfolio. I suggest you already read John Bogle's Common Sense on Mutual Funds. I was pleased to see that this book raises an important question of valuation for when to commit to new purchases of indexed funds. People differ on this subject; but while the S&P 500's multiple is as high as sit is now and cash flow growth is so weak, many people may benefit from holding off or buying other indexes instead. Consider the small cap value indexes instead now, for instance.

I suspect that you can learn a lot by comparing your past stock investing with the patterns described here. Are you a great investor? Great investors have "independence of thought, . . . [and] utter and profound common sense . . . ." The challenge here is that "common sense is . . . it is so uncommon." On the other hand, "those who buy stocks outside their circle of competence are gamblers, speculators, or fools." Please wear the shoe that fits you.

The most accurate prediction of future stock market conditions is that they will fluctuate. Currently, the average stock varies by 50 percent in price each year. What method of stock investing will allow you to either ignore or best take advantage of that volatility? Be sure to consider your emotions at least as much as your intellect and available time in making this determination.

Get a great return on your time and on your investments!

I was extremely disappointed in this book. Having read Cunningham's/Buffetts "Essays on Corporate America", Grahams "Securities Analysis" and "The Intelligient Investor," I had hoped that this book would be a strong synthesis, with some modern additions, and filling in some gaps.

Instead, Cunningham takes an author, Buffett, whose ideas are fundamentally simple, and whose writing is inherently clear, and make them sound incredibly complicated while writing in a massively unclear way.

I bought this book because Cunningham did a SUPERB job synthesizing Buffetts "essays on corporate america". What I forgot when I bought this book was that Cunningham didnt write that book, Buffett did, cunningham just edited it. A man who is a great editor turns out, (in this case) to be a miserable author.

As an example of the bizarre writing style Cunningham uses, take this paragraph (quoted exactly): "In the stock market forest, the ticks of price quotes infect the unprepared fools in the same way and with simiar results. Trader obsession with price quotations spreasd the Q [quote] fever epidemic, addking gas the the fire of Mr. Market's manic depression". Wow- talk about mixed metaphors. manic depression. Ticks. Q Fever. Gas the to the fire. And the entire book is like this, paragraph after paragraph!

Buffett's ideas are inherently simple. Managers should think like owners, modern beta thinking has major flaws, etc. These are beautifully described by Buffett in "essays on corporate america", and have no need for an interpreter to stand between the priest and public. They have even less need for an interpreter as unclear as this one.

It's the best investment book I've read in a long while. I think it should sit on every investor's book shelf. A true classic. I have positioned it on my desk next to my copy of Security Analysis (Graham & Dodd) and The Intelligent Investor (Graham) - exactly where it deserves to be. I especially liked how Prof. Cunningham touched on Chaos Theory as well as the chapter on the Circle of Competence and the Fireside CEO chapter. Of course, Part 3 of the book was so well done it is really hard to elevate one chapter over the other. Really well done. Prof. Cunningham has done the public a great favour with this book. Lastly, the satirical look at balance sheet and earnings manipulation via the fictional dotcom company was a beautiful touch! Graham would've approved and I am sure Mr. Buffett does...

Well, this book is suitable for beginners without reading books of these 2 masters before, with some explanation on fundamental raios (like P/E, Profit Margin, ROE...etc).

However, it's not infomative for people like me, who has read the books about Benjamin Graham and Buffett before.

Besides, the book is relative poor and vague in stating the investment philosophies of the masters (e.g. Without the descriptions of "Selection of Criteria" and "Margin of Safety" from Ben).

The format is relative poor, it's not easy to have a clear ideas towards the ideas of Ben and Buffett, as well as the differences of their philosophies.

However, I really appreciate the book's mention on "Accounting frauds" and the "Differences between the US & European coporations".

If you want to know more about the two investing masters, you'd better read "Intelligent Investors" written by Ben as well as "Buffetology", "Warren Buffett's Portfolio" about Buffett.

Covers a lot of ground very well and briskly. In the first part, it explains how markets work (and how lots of people think they do), the risks and limits of high-risk strategies like day and margin trading and what those mean for other people, asset allocation techniques, and a critical review of new economy rhetoric and what that all means for us. In the second part, key valuation ideas are presented in a way that is easy to understand but that still serious (i.e., really helpful). Topics again range pretty widely, from inflation and interest rates, to the "circle of competence", to earnings and cash flows, to accounting games. The third part is also broad and tight, with a look at what corproate managers do and can be expected to do, including details of popular debates about corporate governance in recent years. The emphasis in this area is figuring whom to trust with your investment resources. The treatment of GE's Jack Welch is particularly rich (and full of a whole separate set of insights as rich as any of the Welch biographies have given). The book really covers all the ground any investor needs to think about, which is I guess a good reason for the title. My only criticism would be that in the area of investor psychology the book mentions some of the key topics but doesn't really get into them as much as it gets into the other topics. But that is really a quibble. It remains a riveting, wide ranging narrative. Worth a careful read.

"Everything should be made as simple as possible, but not more so." Albert Einstein

Mr. Charles Munger likes the above referenced quote when speaking of investing methodology, and the Author of, "How To Think Like Benjamin Graham And Invest Like Warren Buffet", embraces that concept in his book as well. Mr. Lawrence A. Cunningham who authored this book delivers to readers the methodologies of the legends mentioned in his book's title, and he applies them to Corporations ranging from GE, to Microsoft, to Amazon.com. He delivers information that is understandable, that does not mean no effort is required as making money takes work.

Mr. Cunningham is unique as his work is considered the best when it comes to documenting what it is Mr. Warren Buffet does. The book is, "superb", his book is far better than any of the biographies to date, if I were to pick one book to read this would be the one. Quotes are only as valid as their source, and the comments I just referenced were from the sage himself Mr. Warren Buffet when speaking of the previous work by Mr. Cunningham, "The Essays Of Warren Buffet". I have commented on that book some time ago, and I have referred to it countless times. If you trade it should be within arms reach.

This is not a mindless publication that proclaims, buy this now, do this now, the stocks to own now! Books such as these are by definition irrelevant, when is the now that is referred to? If that could be explained I would change my opinion, it cannot, so I shall not. This book dismisses myths, and reviews the fundamentals that have worked for decades. And if there is an appropriate time to read the work it is now. As I write this the NASDAQ has dropped below 2,000 when a year ago this month it was just over 5,000. The DJIA is down over 200 points, and the S&P is down 25.6, and the market has been open for an hour.

So why read the book, Berkshire Hathaway is trading at 95.71% of what it was trading at one year ago. This is at a time when other major firms are down, CSCO at 23.09% of one year ago, Intel at 37.75%; even General Electric is trading at 69.96% of one year ago. These vast differences are no accident, they have been indicative of Mr. Buffet's performance for decades. He had been heavily criticized for not making purchases of Tech Stocks; I don't hear that criticism now.

The Author goes to great length to demonstrate how misleading numbers can be, and thankfully he leaves politically correct speech behind. There is no creative accounting, there is fraud, failed CEO'S are not rewarded with undeserved praise as they are with millions upon millions of dollars for severance after destroying the value of the company they were hired to manage. And he does not speak in generalities, he names companies and their CEO'S whether he is praising or condemning their performance. The definition of a CEO that embodies an individual you trust for their integrity and for caring for your money, Mr. Jack Welch CEO of General Electric. Or the CEO who tries to buy the company profitability with a bad acquisition, based on bad reasoning, Ms. Jill Barad of Mattel. One year prior to the acquisition of The Learning Company Mattel was trading at $40.00 per share, then at the time of acquisition, down to $26.00. And after loosing $100 million for Mattel, the new stock value was $11.00. She was asked to leave, and paid millions to do so.

The paragraph above contains real examples of a myriad of topics that are discussed, ranging from the integrity of the CEO, The Board, how many directors there should be, what they should be paid, and how they should be judged. Another illuminating area was the negotiations between Mercedes Benz and Chrysler, and the list of great case examples continues through dozens of additional companies. Humor is also used deftly and sparingly. Chapters like, Prozac Market, Take The Fifth, and Apple Trees And Experience are wonderful. The apples discussed are not those of Mr. Jobs.

If you have walked by the financial magazine section in the last month a very familiar face has graced several covers. On one magazine the photograph was accompanied by an insipid question along the lines of, "why this person is in fashion once again". The man is Warren Buffet, and the answer is he has never been out of fashion as he has never been as transient, shallow, and seasonal as fashion or all the 15 minute hotshots that come along every minute or so with another method to get poor quick.

No one can match Warren Buffet and the great teachers he studied under and whose methods he has either remained faithful to or modified for his shareholders benefit. The same man says this Author has done a "superb" job in documenting Berkshire Hathaway, better than any other Biographer.

Why would an investor not read this book, and again keep it within arms reach when making an investment decision?

I have 35 stocks on my screen, 33 are down 2 are up, Berkshire A Shares, and Berkshire B shares..........

I believe that this book might be interesting for someone who is unfamiliar with value investing, but I must warn the more experienced reader that not much of new ideas are to found in this book. What surprises me most of all is that the author devotes the first half of his book to convincing people that marekts are inefficient. But what guy believing in efficient markets would ever consider buying a book on investing in the first place ? Right: anyone interested in this book can skip the first half. The second half is rather superficial and brings nothing new on the table for people familiar with value investing. My advice: avoid this book and buy instead 'The essays of Warren Buffet' of the same author. The latter is really a must-read for anyone serious about investing !

I bought this book because I enjoyed Cunningham's The Essays of Warren Buffett. Unlike lots of "encore" performances, this one deserves bravos and kudos. It is an energetic, comprehensive tour de force on investment wisdom. It is tempting also to say the book is timely, for if the market for tech hadn't crushed the way it has been doing, people might not become as excited about this book as they will be. Yet the themes of the book are universal so the book itself is timeless not timely. It would be more accurate to say the market gyrated in a timely way. But obviously Cunningham wrote the book while the market was in a euphoric frenzy, indicating his own fortitude and constancy of outlook. Very nice job, again.

I am an 18 year old high school student who read this book for my economics class. I have recently opened an online investing account and have been working hard to learn all I can about the market and how to excel in it. I really feel that this was a great book for me since it covered everything about investing. If you are just getting into the market like me, I definitely suggest that you read this wonderful book since it really does give you that extra knowledge about the stock market that others dream to have. If you already know a ton about the market and investing, all I can tell you is that there must be something in this book that you will learn. Basically, here's my overall view. Read the book if you want to be different from all the other investors who think they know everything there is to know about the market. I also believe that this is a great investment of your money and time, since it is sure to help you in your future investments.

Please read the other reviews warning you about the content of this book. I did not believe them, they were right. Benjamin Graham and Warren Buffett are the two people I have modeled my investment style by. (Which has enabled me to return 24% over the past 4 years). How could I not read this book based on the title? While Cunningham did an outstanding job compiling the essays of Warren Buffett, this book was incredibly tedious and I do not think captured either of the great men's thoughts. This book is 5% Graham, 5% Buffett and 90% the author. He is a law professor if that gives you an idea of the writing style.This book droned on for 40 pages about corporate governance, you had to read for hours to stumble on to a nugget of Graham and Buffett. Save yourself the trouble and buy Cunningham's other book "The essays of Warren Buffett" he did an excellent job compiling that book.It is actually the book Warren Buffett told CNBC viewers to read to get his real investing style. Also read Benjamin Graham's books start with "The Intelligent Investor". Or buy Janet Lowe's book "The rediscovered Benjamin Graham selected writings of the Wall Street legend" This book's title should have been "How to think like Professor Cunningham's students and invest like a teacher".