on August 13, 2011
This book does a fantastic job of highlight the 5 most well known value investors: Warren Buffet, Charlie Munger, Ben Graham, Peter Lynch, and John Neff. He also covers Phil Fisher, but as he was known more for "Growth stocks," so this section is more informative for knowning how to evaluate management more than anything else.
Each of these pro's has several methods in common with the other, but there's enough here to fit everyone's style. His overview of "owner earnings" is VERY good, especially considering most people don't seem to understand how to use it properly. Unlike some value investors, Arnold stresses low diversification ("put all your eggs in one basket, and watch that basket!) over high diversification, a view that few share. In my own experience, diversification is merely a poor substitute for proper analysis. In the long run, it's much better to own only 9 or 10 stocks that you know very well, rather than 30 or 40 you're just vaguely familiar with.
His section on industry competitiveness is fantastic for those of us who didn't take any business classes in college. By understanding the different "moats of competition" that surround each business (or rather, don't), you're in a better position to grasp the changes within that industry. Knowing a businesses potential competitors is a huge plus when searching for value, due to the costs incurred by others trying to enter the industry.
Overall, this book is a great introduction for those starting out in the value field. I would recommend this in conjuction with other value books, such as Greenwald's "Value Investing: From Graham to Buffett and Beyond," and Mizrahi's "Getting Started in Value Investing." Of course, don't forget the essentials like Graham's "The Intelligent Investor," Dreman's "Contrarian Investment Strategies," and both from Lynch "One Up on Wall Street" and "Beat the Street."