Customer Reviews

The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett

5 star:		(11)
4 star:		(1)
3 star:		(1)
2 star:		(0)
1 star:		(2)

 

 

rather than repeatedly reading references to graham & dood, seth klarman, and buffett throughout this book - just go read them directly.

and the section about the actual "business" of value investing is like 4 pages.

I had done extensive reading about value investing before I bought this book. I was disapointed. I was expecting more in-depth instructions how to evaluate companies, cash flow, possible traps for investors etc. Book only scratches the surface of value investing. Only generic instructions how to approach value investing and that was it.

First a disclaimer: I am not an expert. I am new to the concept of "Value Investing"

Nearing retirement, I decided to take a bit more control of my investments. I read reviews of many of the investment advice books on Amazon, bought a few and read them cover to cover. I also perused many web sites covering the same ground. The books and web sites that impressed me the most were the ones advocating one flavor or another of what is commonly called "Value Investing", but I always felt I was missing key pieces of the puzzle. That is until I read Mr. Gad's book. I don't mean it made me an expert. Far from it, but I think it did show me the big picture such that I now feel I have all the pieces (the "elements" of the subtitle), even if not all the associated skills to best apply those pieces.

This is actually a BIG step in learning about anything -- getting the big picture and knowing what it is you need to work on for a deeper understanding. Even though I still have a long way to go, I think Mr. Gad's book has taught me enough actual, practical, skills to make it even feasible for me to start managing my own investments.

Some big things I got from this book:

1) It is an every-day occurrence for us to make judgment calls when buying things -- am I getting my money's worth? That's "value buying". "Value investing" is the same thing applied to investments. When you buy a stock you are buying part ownership in a company. The stock is a receipt confirming your ownership and what you paid for it. The price of the stock does NOT tell you the value of the company. That is for YOU to determine (as best you can). The price of a stock and the value of the company are not the same thing. The point is, you want to pay less than the true value. This is possible because the stock market is only efficient (at properly pricing stock) in the long run. In the short run, emotion and news (good or bad) cause price swings that do not reflect actual value. Don't you be distracted by the same information clutter.

2) Determining the value of a company is not easy and it is always an estimate. Much of a company's value can be estimated from its SEC financial statements, but one needs to apply judgment to those numbers, not just secret, magical, formulas. There are formulas that can help you understand the financial statements and help you apply that judgment, but still, the judgment is the key. So is other knowledge beyond the financial statements. All this is hard work. No magic available.

3) If you talk to investment advisors, they might not understand "Value Investing" in the same sense that this book (among others) defines it. Many see "Value" and "Growth" as opposite ends of a spectrum. What I have learned from this book is that this is a poor way to view things. Potential for growth is one of the main factors that define a company's value. Value investing tells you how to buy growth the smart way. You want to buy "growth at a reasonable price" (GARP).

Yes, there are other approaches to investing and it is up to you to decide what you are most comfortable with. Maybe you will use different approaches for different investment goals. For example, someone looking for big fat dividends my not care much about a company's true value as long as it is pumping out the dividends. You may need to mix and match in your portfolio. This book should help you decide.

In the book's twelve chapters, the first three explain why finding under priced assets works, the next six teach a method for finding, analyzing, and acting on investing in these under priced assets, and the last three chapters close with case studies, common psychological pitfalls to avoid and a summary on how to start an investment partnership. Mr. Gad uses clear terminology that teaches a beginning investor how to search out and then analyze any assets. The experienced value investor will gain insights from details, ideas, and methods shared throughout the text.

The book was written during the market turmoil of 2008 and early 2009. These times of stress within the financial industry serve as a very good reminder as to why value is what you get and price is what you pay each and every time you venture into the financial markets to buy something. When you do your homework and you find that an undervalued asset exists then you may decide to buy it. If that asset price continues to drop, then you recheck your analysis and purchase more, if the original and rechecked analyses continue to show asset under pricing. Doing that is much easier said than done. This book gives you a framework for acting in such a rational fashion. The discipline to follow through and continue investing at times of maximum pessimism was tested due to the extreme market volatility that took place from December 2007 to present. That discipline will be tested again in the months and years ahead; therefore having the lessons of Mr. Gad's book within your mental model framework will serve you well.

Spend your hard earn money on this book, invest your time in studying its lessons and you will not feel that either have been wasted. This is a book worth reading, studying, and using as you build your net worth.

You can be the smartest person in the world with an education from one of the top business schools in the world, but this will not be enough to be a successful investor. The author of this book, Sham Gad, says that the stock market tends to make smart people do dumb things with their money. How true this is. Even though I am experienced in investing, I found this book to be a great resource. I usually highlight sections that I like when I read books, and there weren't many pages where I did not have something highlighted.

The author discusses topics such as investing in stocks as if they were businesses, searching for investment opportunities, valuing companies through various methods, and avoiding common mistakes. Also, there are three case studies that show value investing in action. In 2009, one of my best investments was a company called Ternium, the most profitable steel company in the world. It was a pleasant surprise that the author included Ternium as one of the case studies. Whether you are a beginning or advanced investor, I can assure you that you will find this book resourceful.

Gad does a great job of laying the right foundation for investors to have the greatest chance of investment success. I think that this book is one of the best on the market when it comes to mental discipline. I like to think that I am pretty disciplined, but reading the author's words on how to deal in situations when a particular stock drops significantly, or when the general market is up and you are down, was very helpful. Many investors, especially beginners, think that they cannot be better than professionals because they are not smart enough. But they do not realize that the investment world is filled with smart people who cannot do better than average. The author says that most of these smart professionals are average because they lack discipline. If you have the discipline to say no and follow the investment strategy outlined in this book, you will likely beat most of the professionals even though you might lack experience and smarts.

- 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

First the bad: very repetitive towards the end - I found I could often skip many pages with little or no loss of continuity. Many misused words, grammatical errors, etc.

The good: if you've never really been exposed to value investing, it is a good introduction.

What could have made the book great: The author presents some example company valuations, which for me were the meat of the book. Except, there was almost no beef - they were a far too small part of the book. If the book had been cut in half, and another half added that presented more complete examples of how to analyze and evaluate companies of different size and types from a value investing point of view, I could see giving the book 5 stars.

The Book written by Sham M. Had shows the averageor exprianced investor that investing in stocks is is buying a piece of a business with the six elements of intellgent investing used by the masters such as Warren Buffet. 1)develop investing philosephy2)presevation of capital3)business valuation4)have discipline to say no.4)The art of patiance.5)ignoring the media and then putting all together. then finnally and the veryend of the book it shows you how to start an investment partniship.The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett

Sham Gad is a student of Buffet and has broken down value investing for the lay person... you don't need a finance degree to understand the concepts, and provides good advice for the novice or anyone interested in going back to basics of value investing...

If you liked works by Mohnish Pabrai(Dhandho investor), Joel Greenblatt(The little book that beats the market) and Mary Buffett(Buffetology and New Buffettology), chances are you are certainly going to like Sham's work as well.

For someone not introduced to the collective speak of Klarman/Graham&Dodd/Buffett/Pabrai/Joel Greenblatt, this is a nice compendium of what they have said and it has been broken down to the novice investor (a humble guide to the professional) in plain speak and a common sense manner. While one may say that go read each one of the author(and all of their works) than read repetitive references, who has the time and money to go seek all of the authors...hence, in my opinion, this is a very good book...where the message is constantly repeated much like parenting(minus one star in the ratings)...otherwise, I really hoped this book was available to me in 2008...even though speculating, I would have made the most investment in oct 2008 or mar 2009.

Chapters 7, 8 and most of all chapter 9 stand out. In the light of the 2008 collapse, chapter 9 stood out offering much hope(pity the book came out in fall 2009)...I liked the consistent treatment of who is a speculator/value-investor and notes on the courage to do a maximum investment at the most pessimistic of times.

For those doubters, I benefited handsomely(50+ %) from Sham's analysis on Ternium Steel posted on his blog([...]), buying it in around the 20s(sep 2008) and selling it few weeks earlier in march 2010. This post, is simply a gesture of thanks to the author. I note the same analysis is presented in this book.

I could go on and on about what I liked in the book, but suffice it to say - there are gems littered all over the book - 2 of my favorites are the Tiger Woods example and the second one being, finally, in the stockmarket, it is a zero sum game(buyer/seller)...we often tend to forget this fact.

all in all, 4 stars, good work and expect to read more from the author.

If you want to understand how Mr. B values companies, buy this book. He explains everything in simple terms, unlike other authors who believe in complex formulas and splicing the Bal and Inc statements. Mr. B said that Graham was not at his best when he used algebra. Simple is what you want and Sham's the man! Yes, in 4 pages he introduces you to value investing. He continues with other elements to ensure you understand it is not just numbers, but other factors like management...etc--Mr. Buffett once said that if he had to know/use algebra/calculus to value companies, he'd be a bum on the street with a tin cup! BUY THIS BOOK!