Most Helpful Customer Reviews
|
|
9 of 9 people found the following review helpful:
5.0 out of 5 stars
For Value Investors Only - Contrarian Strategies That Work, January 5, 2000
This book should click with value investors. Gallea and Patalon provide practical technical and fundamental strategies to beat the market (with little downside risk) as a contrarian investor. In today's frothy market, the principles gained in this book will help you screen for stocks with major upside potential.
|
|
|
11 of 12 people found the following review helpful:
2.0 out of 5 stars
Haven't we seen this before?, January 19, 1998
By A Customer
If choosing a book from among many recent releases in finance is like picking an entree from a buffet, then this book would be the equivalent of reheated, bland scalloped potatoes: it isn't as if there isn't any worthwhile "nutrition" in the book, but there are probably other tasty morsels that deserve attention. This is lamentable, considering that contrarian investing is probably one of the most rewarding, intellectually stimulating approaches out there. The tax benefits aren't bad either. Still, this book offers little that a careful reader couldn't already find in Richard Band, Ken Fisher, or David Dreman. There are some valuable sections of the book, in particular, the chapter on insider buying. Problems abound, however. The authors mistakenly equate contrarian investing with picking up beaten-down stocks. It is not necessarily true that stocks have to plunge in price before they become a value; they can, for example, stay static in a bull market, as evidenced in the recent purchase of International Dairy Queen by Warren Buffett; or they can double while still remaining a bargain. The authors stick to an arbitrary rule that stocks have to decline at least 50 percent before becoming acceptable for purchase. However, the only evidence offered is an academic study ending in the early 80's. What about the last 15 years or so? What is so special about 50 percent? The book cites many similarly dated studies. In addition, the authors offer other mechanical rules: a certain PE (what if the earnings disappear?), a certain price-sales ratio (what if the price drops, but the sales do as well? Is the stock still a buy?), and book value (again, doesn't book value vary among stocks?). The book almost totally neglects the importance of studying the underlying industries of stocks to determine whether a stock with a low PE may still be a poor choice, or whether a stock with high book value could still be a bargain. The same measuring sticks, generally, are applied to all companies, supermarkets to semi-conductor makers. There are other problems, many of which could or have been pointed out in previous studies on contrarian investing. The book, for instance, refers to Irving Fisher's prediction, made near the crash of '29, that stock prices seem to have a reached a "permanent plateau." Yet Fisher was not really involved the mania associated with a run-away market, but rather was trying to determine a bottom after an already severe market decline (check the charts from 1929--the decline began late in the summer and accelerated in October, just like in 1987). The authors also discuss the so-called "Nifty Fifty" from the early 70's as an example of stocks that should have been avoided due to irrational buying. Yet many of those stocks, if held for 10-15 years (i.e. the long term) after the 1974 collapse, would have definitely rewarded the patient investor (if only I could have bought McDonalds in 1973!). Perhaps the most humorous example in the book is Edwin Lefevre's REMINISCENCES OF A STOCK OPERATOR (supposedly a fictionalized biography of the legendary trader Jesse Livermore). Citing the unnamed trader in Lefevre's book as an example of value-oriented, bottom fishing contrarian investing makes absolutely no sense. The trader in Lefevre's book had disdain for those who would purchase beaten-down stocks or commodities! He bought high and sold higher--at least until he lost it all. Contrarian investing, in principle, requires discipline, rigorous research, and conviction. A helpful guide to help those interested in such an endeavor is still needed, for this book does not adequately do the job.
|
|
|
7 of 7 people found the following review helpful:
4.0 out of 5 stars
Excellent Summary, April 2, 1999
If you've read any other contrarian investing books, I don't think much is new here, but if you haven't read any, then this is a great read. Nicely organized, reasonably easy to read.
|
|
|
Most Recent Customer Reviews
|
by David Dreman
by Anthony M. Gallea
by Anthony Gallea
