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Security Valuation and Risk Analysis: Assessing Value in Investment Decision-Making Hardcover – October 20, 2010

ISBN-13: 978-0071744355 ISBN-10: 0071744355 Edition: 1st

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Product Details

  • Hardcover: 614 pages
  • Publisher: McGraw-Hill; 1 edition (October 20, 2010)
  • Language: English
  • ISBN-10: 0071744355
  • ISBN-13: 978-0071744355
  • Product Dimensions: 9.5 x 7.7 x 2.2 inches
  • Shipping Weight: 2.7 pounds (View shipping rates and policies)
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (4 customer reviews)
  • Amazon Best Sellers Rank: #1,133,747 in Books (See Top 100 in Books)

Editorial Reviews

About the Author

Kenneth S. Hackel is president of CT Capital LLC, an investment advisory firm, and founder and past president of Systematic Financial Management, Inc. An internationally recognized expert in security analysis, he has managed the nation's leading mutual fund, a very successful investment advisory firm, and has consulted and written on mergers and acquisitions and fairness opinions. Hackel lives in Alpine, NJ.

More About the Author

Kenneth S. Hackel is founder and President of CT Capital LLC, an institutional investment advisory firm specializing in the analysis of corporate cash flow and cost of capital in investment decision making. Until 1996, he was President of Systematic Financial Management Inc., (SFM) a multi-billion dollar institutional investment firm he founded in 1982. At SFM, Kenneth successfully implemented his free cash flow-based investment philosophy in managing funds for institutional investors across multiple US equity investment disciplines.

Kenneth's upcoming book, "Security Valuation and Risk Analysis: Assessing Value in Investment Decision-Making", to be published by McGraw Hill later this November, significantly extends the theories and analysis presented in his earlier book, "Cash Flow and Security Analysis," 2nd edition (McGraw Hill, 1995). His new book provides extensive analysis and discussion of innovative, fundamental methods and models for a more accurate determination of cost of capital and return on invested capital. The models are based on cash flows and extensive credit analysis. To this end, half the book is devoted to the understanding of cash flow; half to cost of capital, as risk to cash flows are meticulously expounded upon. The analysis of risk and credit represents, according to Mr. Hackel, the single most important under-explored factor in security analysis and the primary reason for investor disappointment of their investment returns.

He posits that using fundamental factors to calculate cost of equity capital (reflecting a company's operating and financial risk, capital structure, and miscellaneous intrinsic items) and return on invested capital based upon free cash flow generation (in lieu of traditional earnings or EBITDA-based measures) more accurately reflect the underlying financial profitability and stability of a firm, its growth potential and value enhancement level. Using a more robust discount rate (to model and discount free cash flows) to arrive at 'fair value' will provide a more accurate comparison to current valuation levels, thus leading to more accurate trading signals. He illustrates the use of a comprehensive cost of capital credit worksheet utilizing 60+ credit variables in place of the popular Capital Asset Pricing Model in divining an entity's true cost of equity, which results in superior investment performance with considerably lower risk.

Also explored in detail are those necessary adjustments to cash flow from operating activities to give the analyst a normalized computation.

He also explains how return on invested capital should be measured, including firms which are service-based.


Ken is the author of many articles on security valuation and analysis, and pioneered the analysis of determining savings in supply chain and other discretionary areas, which could boost free cash flows. He is internationally recognized as a leading expert in valuation analysis, having also created the use of free cash flow in lieu of EBITDA in ROIC analysis. EBITDA, he explains, is a deficient metric, in many respects.

Ken is accepted to be the sole investment advisor in US equity mutual fund history to take over management of the worst performing mutual fund, and in a single year turn it into the best performing fund.

With over 35 years of investment experience, he has consulted on mergers and acquisitions, including fairness opinions. His work has been published in leading academic journals as well as leading financial news media, and is quoted worldwide. He is a graduate of City College of New York and earned his MBA (Finance) from Baruch College.

His blog may be read at www.credittrends.com and his twitter @credittrends.

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Most Helpful Customer Reviews

2 of 4 people found the following review helpful By Zoe on December 10, 2010
Format: Hardcover
This book is brillliant. It brings to light a far superior method of risk analysis than either I learned in grad school, or have used in my research reports. I highly recommend reading this cover to cover.
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5 of 9 people found the following review helpful By Jon on November 10, 2010
Format: Hardcover Verified Purchase
This book is great for anybody who cares about cash flow. It goes into detail how investors should think about risk and the proper discount method. Anybody who wants to know about how to value a security needs to buy this book.
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5 of 10 people found the following review helpful By Jason on November 5, 2010
Format: Hardcover
A great book grounded in reality. It provides a pragmatic way to analyze securities while giving a framework for subjective analysis.
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4 of 15 people found the following review helpful By Bernard on January 10, 2011
Format: Hardcover Verified Purchase
I had just received this book about 2 weeks ago. And of course I haven't finished reading the whole book yet. I quickly looked at the index and search for the keyword "convertible debt (CB) " . There is only a rough discussion of CB. I am disappointed that at this price tag the author didn't include much discussion of CB . And CB could be a serious credit risk for a company.

Last year in Hong Kong a company got bust because it couldn't pay back the debt holders of those CB when it expired. That company had a shortage of cash flow. The debt holders at that time didn't want to convert them to stocks because the stock's price was BELOW the conversion price. So when one wants to buy stocks of any company one should find out if that company has any outstanding debts, including convertible debts.

Other than that, I think this book is quite good.
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