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The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett Hardcover – October 19, 2009


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Product Details

  • Hardcover: 268 pages
  • Publisher: Wiley; 1 edition (October 19, 2009)
  • Language: English
  • ISBN-10: 0470444487
  • ISBN-13: 978-0470444481
  • Product Dimensions: 6.3 x 1 x 9.3 inches
  • Shipping Weight: 1 pounds (View shipping rates and policies)
  • Average Customer Review: 4.3 out of 5 stars  See all reviews (16 customer reviews)
  • Amazon Best Sellers Rank: #1,342,818 in Books (See Top 100 in Books)

Editorial Reviews

From the Inside Flap

"Buy a business, don't rent stocks."—Warren Buffett

While you've probably heard numerous "financial experts" talk about the many ways to make money in the markets, the fact is, there's only one strategy that has truly proven itself over the years. Thanks to the foundation laid out by Benjamin Graham and expanded upon by Warren Buffett and others, value investing—which consists of buying the stock of companies that trade for less than their intrinsic value in order to maximize return while minimizing risk—has helped countless individuals consistently build wealth by avoiding permanent capital loss.

Successful value investors have an ingrained mental framework through which all investment decisions are made. This framework, which stems from Graham's belief that "investment is most intelligent when it is most businesslike," can put you in a better position to improve the overall performance of your portfolio.

Written by Sham Gad—founder of the Gad Partners Funds, a value-focused investment partnership inspired by the 1950s Buffett Partnerships—The Business of Value Investing effectively examines the fundamental tenants of this approach and skillfully illustrates the six essential elements of the entire process. Opening with informative discussions of how value investing focuses more on buying a piece of a business and less on buying a company's stock, this reliable resource quickly moves on to detail exactly what it takes to become a successful value investor.

  • Develop a sound investment philosophy

  • Have a good search strategy

  • Know how to value a business and assess the quality of management

  • Have the discipline to say no

  • Practice the art of patience

  • Have the courage to make a significant investment at the point of maximum pessimism

Along the way, you'll become familiar with specific case studies that illustrate how to approach investing in an intelligent, businesslike fashion. Each one—all of which were actual investments made by the author at one time or another in his career—offers a different way to determine whether a company under investigation is indeed a bargain investment opportunity.

For those willing to put forth the effort and show some patience, the stock market offers the greatest forum for wealth accumulation. Filled with in-depth insights and practical advice, this reliable resource can help you make the most of your time in today's markets, by following a value-oriented approach to investing that continues to make sense.

From the Back Cover

Praise for The Business of Value Investing

"Sham Gad's The Business of Value Investing is an excellent primer on value investing. The book chronicles the step-by-step process of successful value investing. It will keep you reading and learning. And learn you will."—Vitaliy Katsenelson, Director of Research at Investment Management Associates, Inc., and author of Active Value Investing: Making Money in Range-Bound Markets

"Sham Gad's new book does a great job ofteaching the most important lesson in the business world:discipline, a predefined and strictly adhered-to philosophy,temperament, hard work, and a willingness to learn from mistakes are much more important than innate¿IQ. The Business of Value Investing spells out exactly what Warren Buffett means whenhe says, 'I am a better businessman because I am an investor;I am a better investor because I'm a businessman.'"—Mark Sellers, Managing Partner, Sellers Capital, LLC


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Customer Reviews

I found the book to be a quick read that was well structured.
sobo
Mr. Gad shows you how to invest using real world examples based on Warren Buffett's investment principles.
Jonathan Herson
Even though I am experienced in investing, I found this book to be a great resource.
Mariusz Skonieczny

Most Helpful Customer Reviews

27 of 34 people found the following review helpful By Jessica Kelly on January 11, 2010
Format: Hardcover Verified Purchase
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.
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15 of 19 people found the following review helpful By Otto Wagner on June 13, 2010
Format: Hardcover
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.
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6 of 7 people found the following review helpful By Bertilak on October 6, 2010
Format: Hardcover Verified Purchase
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.
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5 of 7 people found the following review helpful By Mariusz Skonieczny on January 19, 2010
Format: Hardcover
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.
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1 of 1 people found the following review helpful By TTL on February 10, 2011
Format: Hardcover
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.
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8 of 12 people found the following review helpful By Geoffrey P. Cole on December 30, 2009
Format: Hardcover Verified Purchase
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.
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