91 of 94 people found the following review helpful
In the interest of full disclosure, it's best I state that I've been an extremely satisfied investor in the Tweedy Browne Global Value Fund for over a decade. The fund never does outstandingly well, but it also very seldom loses money. Over time, my initial investment has done surprisingly well.
This book should not surprise anyone who has read Tweedy Browne's shareholder letters, but it does a great job of synthesizing Tweedy Browne's investment philosophy, while also providing more in-depth discussion of how to research stocks and understand financial statements.
Chris Browne is a Benjamin Graham disciple, and his firm was labeled as on of the "Superinvestors of Graham and Doddsville" by Warren Buffett. This book might be characterized as a shorter, more readable version of Graham's "The Intelligent Investor."
It's important for anyone who might buy this book to understand what it is, and what it is not. This is a primer on value investing as applied to individual equities, not an in-depth treatise on how to invest, allocate assets, etc. The goal of this book is to show why value investing works, how it works, and how to implement an investing process. It does not, nor is it intended to, provide in-depth discussion about how to value companies or financial statements or how to assess competition. Keep in mind that this is a 180-page book that takes 2-3 hours to read.
Experienced investors might find parts of this book to be somewhat basic. However, starting with the chapter entitled "Sifting Out the Fool's Gold," it really imparts a lot of information that everybody should know (in that case, how to tell if a stock that meets screening criteria is really a value stock or a dud). The chapters about financial statement analysis and how to analyze a company's future prospects were well-written and provide an outstanding roadmap to analyzing a company that even more experienced investors would do well to heed.
The 16-point checklist in Chapter 14 ("Send Your Stocks to the Mayo Clinic") is an excellent way of examining a company to determine its competitive position and future prospects. In my opinion, that checklist and the related discussion alone are worth the price of the book.
The discussion on insider buying and selling was particularly interesting. Although this is part of many investor's decisions, the book demonstrates just how important insider buying can be as a value signal. I intend to pay more attention to insider buying as a result.
One particularly interesting aspect of this book is its discussion of international value investing. That overview should provide investors with examples of why value exists overseas, but most investors probably can't master the intricacies of non-US accounting methods.
This is a great book for less-experienced investors, and contains a number of nuggets that may be of use to even highly experienced investors. Readers who want a more depth might like Martin Whitman's two books or "Security Analysis" by Graham. However, these books can be tough reads, and for novice investors this book is a great place to start. Other good reads for investors are Joel Greenblatt's "You can be a stock market genius" and Dreman's "Contrarian Investing: the Next Generation."
61 of 64 people found the following review helpful
on October 5, 2006
If you are new to value investing this book covers the basics. The research on the outperformance of value investing is well documented and if you follow the advice in this book you will do well in your stock investments.
I was curious how the Tweedy Browne mutual funds peformed though so I went to their web site. In each period - 1, 3, 5, 10 and since inception, the returns after taxes on distributions of the Tweedy Browne American Value have failed to beat the S&P 500 index or the Russell 2000 index. When I started investing 10 years ago I read a lot of books by many authors without checking their record first. And, as a result I made a lot of expensive mistakes. Just something to keep in mind when choosing whose advice to listent to!
I still give this book 4 stars because I believe the author gives sounds advice. However I would recommend "The Essays of Warren Buffett, Lessons for Corporate America", the classic "The Intelligent Investor" by Ben Graham, and "Contrarian Investment Strategies in the Next Generation" by David Dreman.
84 of 97 people found the following review helpful
on November 23, 2006
Unfortunately, this book has to follow the amusing and rewarding "Little Book" of Joel Greenblatt in Wiley's series. Therefore, unfavorable and perhaps unfair comparison is unavoidable. I do respect the experience and attempt of Christopher H. Browne to write a small book on value investing, but I feel he comes up short. If it was a friendly talk at a club you could find it mildly entertaining, but if you are looking for value, well...
First, value investing is not a strategy where a magic formula or a magic list could break an entirely new ground. Yet alone a "Little Book". You read just one value investing book and "Buy Stocks On Sale", "Margin of Safety", "First, Do Not Lose Money", "Second, Do Not Lose Money" pretty much become recurring and familiar ideas. There is no magic ratio, magic anything in analyzing income statements, earnings predictions, book value etc, it takes hard, thorough work, experience, patience and knowledge. You have to know what to know. You have to know what and where to look at. You have to know why. You have to know what, how and where numbers can be altered with GAAP or else. In this regard a reader could have expected at least a general(novel?)framework, a way of thinking instead of the presented essay-type, list-type ("I also look at...") writing. Or, like in Joel Greenblatt's book, we could have been entertained with a "Jason's Gum Shop"-type metaphore/concept.
Second, a reader of this book is either a convert and firm believer of value investing (Buffett, Munger, Fisher books pack the shelf), looking for additional ideas, NEW concepts or aspects and will find nothing new here. Or, the reader is a beginner or a freshly burned growth (hype)investor entertaining a fresh start and will be turned down by a dry, uninspiring, unexciting, somewhat disorganized book. Quite possibly this reader gives up, will leave this book unfinished and subscribes to yet another advisory service or dumps her/his money into an index or mutual fund. That is, not many readers would be enriched here.
Third, value investing is truly a winning strategy. So do not give up or get discouraged by this book. (Phil Town, David Dreman, Mary Buffett, Philip A. Fisher are good starts.)
22 of 24 people found the following review helpful
on September 29, 2006
OK, I'm a value sort of guy. I look for bargains when I shop. But getting a bargain doesn't always mean `cheapest.' Cheapest can be a crummy product at a deservedly low price. Value is getting a good product at a fair price, and who among us doesn't want that? If I run my life like that, why not my investments? Well, I'm a `whatever it takes' sort of investor. Not a pro, but experienced and better than average. And, as I look back over my own investing, the one investment style that has outperformed all others is 'value.'
In the parlance of investing, as Chris Browne explains, value investing is buying good stocks not only at a fair price, but at bargain-basement prices. In "The Little Book" he shows us how to do it. If you're an experienced investor, the first few chapters may drag a bit as Browne lays the foundation, outlining the virtues of value investing and explaining how to determine a company's worth using common and not-so-common indicators. He also tells us how value stocks come to be `values' and when to invest in `value.' But this is good stuff and an important precursor to showing us how to uncover prospective value stocks, which he gets right into in chapters Six through Ten. Along with these, chapters Eleven through Fourteen are the meat of the book. Here we learn how to determine which of our suspects are truly values that are likely to make us money, the winners, and which of them are deservedly cheap, the losers, and are going to stay that way.
In the remainder of the book, Browne continues making a case for value investing, adding related conventional and not-so-conventional market wisdom, and contrasting value with other investing styles. Chapter Seventeen is entitled "It's a Marathon, Not a Sprint" and is subtitled "It's time in the market, not market timing, that counts." Indeed, that's what this is all about. Value investing is buy-and-hold with a twist. You buy historically good companies when the price is low relative to what the company is worth and hold until the price appreciates to nearer its true value. This can take some guts, but there is virtually nothing in the world of investments that will reap greater rewards over the long haul. Browne points out that value investing is also one of the better ways to hedge your bets, smoothing out the rough spots and market corrections, and he backs those claims up with real world numbers.
I really like this book and wish it had been written twenty years ago. But, I will warn you that this is not another one of those I-made-money-in-the-market-you-can-too books, written by someone who no longer trades, instead making a fortune doing nothing but hyping and selling get-rich-quick schemes. Nor is Browne one of those guys who rolls up his sleeves and screams into the TV camera. He is a practitioner. Better yet, he is a practitioner with a stellar thirty-five year track record in value investing. Even so, he's humble, a quality that makes his work here accessible. Browne learned from his father, who along with the current champ of value investing, Warren Buffett, learned from the father of value investing, Ben Graham. He says if he can do it, so can we and he tells us how in a succinct, friendly and straightforward manner.
For most, "The Little Book" is a quick 2-3 hour read. But Browne tells us this is not the quick way to riches. Value investing, he says, doesn't take a lot of brain power or specialized skill. Rather, it takes work and patience. Browne does not promise that if you buy and read "The Little Book of Value Investing," you'll begin seeing dividend checks in the mail the next and every day. What he does do, though, is give the average investor solid advice and sensible techniques for going about the task of amassing wealth through value investing. And, he does all that for a mere $20. Now, that's value.
19 of 21 people found the following review helpful
on August 14, 2007
The Little Book of Value Investing is billed as an introduction to value investing--as a quick way to learn the tenets of this particular investment style and to lay a groundwork for either choosing a fund to manage your money or for further research. Instead it is a superficial look at value investing, quickly glossing over some very important aspects of choosing a company, failing to warn of the potential pitfalls that may arise, and presenting value investing as the only `safe' way to invest, which it is not. A value investing approach can fail in the market as well, and this book more or less refuses to acknowledge that.
This is one of those investing books I put in the "avoid" category for the simple reason that it provides just enough information to go out and get yourself hurt in the stock market. It skims the surface of many basic value investing tenets without going into enough detail to really help someone choose a company adequately. Worse yet it seems to set someone up perfectly for a "value trap"--a company that appears cheap when you examine it but which ends up performing very poorly for years after you buy it. An example: Browne explains price to earnings and argues that lower is better, advising that one of the primary criteria for value stocks is a low P/E relative to the market. He gives the example of some banks to show a low P/E stock. That's all well and good, but it's important to recognize that financials traditionally have lower P/Es than many other industries. If you really want to find value you need to evaluate a company's P/E relative to its historic price to earnings ratio, as well as compare it to the P/E of it's peers. Buying an integrated oil company at 15 times earnings will seem cheap if you've been looking at stocks with P/Es of 20, but if the company's peers are trading at 10 times earnings it does you little good.
Browne's example seems dangerous to me, as do many others he gives. When advising screening for a low P/E he never mentions a potential pitfall--that low P/E stocks can quickly turn into high P/E stocks if earnings estimates are slashed. A good example of this was homebuilding stocks in late 2006. Some of them were selling at 4 times earnings, but only until the earnings estimates were cut to the point that the P/E ratio suddenly became high and then in some cases ceased to exist as these companies began losing money. Browne's argument that stocks trading close to book value have a margin of safety is also flawed-what if the book value includes a bunch of real estate (again, homebuilders being a prime example) that was purchased high and is now declining in value?
It's not that Browne's advice is bad--it's just that it's limited and very incomplete. I feel it is important when teaching about investing to treat both the benefits AND the risks of a particular style of investing, and Browne fails to do that. Instead he acts as if following the simple methods he sets forth will give you a margin of safety (a la Ben Graham) that is foolproof. It is not.
My biggest problem with the book, however, stems from the fact that only about half of it has anything to do with investing at all. Browne rambles from time to time throughout the first half of the book, touching upon various principles here and there in a more or less disorganized manner. About 2/3 of the way through the book, however, he abandons any actual teaching, and spends most of the last 50 or so pages grinding his personal axes against clients, growth investing, bubbles, and a whole slew of other topics. That part of the book is useless in my opinion, especially since most of it is a rehash of things he ranted on earlier in the book.
When it's all said and done I cannot conceive why anyone would benefit from reading this book. If you're interested and are new to value investing this book, which can be read easily in one sitting, will not provide you the groundwork you need. If you're already a student, or at least a casual observer, of value investing you won't need someone to explain what a P/E ratio is to you and why lower is often better. Skip this one-if you want to learn about value investing there are many books out there that will provide you with the actual groundwork you need without glossing over and dismissing the limitations.
12 of 13 people found the following review helpful
on October 6, 2006
There are a lot of best selling "value investing for dummies" type books out there these days, but most of them recycle the same old cliches while underestimating the reader's ability to comprehend complicated investing approaches. The Little Book of Value investing does neither. It is professionally written by someone who'se been in the game a long time and is willing to share important lessons without dumbing them down too much. I thoroughly enjoyed my first read of this book and find myself regularly flipping through it to generate new investment ideas.
11 of 13 people found the following review helpful
on November 21, 2006
If you don't think this book is all you need to invest intelligently, you will NEVER find one.Why?
I have read Ben Graham's book; Warren Buffett's essay; John Neff on investing; David Dreman; Seth Clarman, "margin of safety"; Value Investing Today; Marty Witman's book; Brandes' Value Investing; David Swensen's....etc, and hundreds of annual reports form value guys..trying to find some "magic formula". What I rearned..there is no such formula!!!!!!
What did I realize?
1) there is only a range for intrinsic value, and you want to buy when the price is below or near the lower end of the range. "roughly right, than precisely wrong", "margin of safety".
2). Use various models to figure out the range, DCF (used by Private Cap Mgmt, Longleaf), P/E multiple, P/B mulitple etc, and importantly apraisal multiple (M&A or buyout). Be conservative on variables....safe to use normalized earnings, margin, growth rate...etc....power of reversion to the mean.....optimism is the enemy.
3). Read 10 years of annual, and all the companies in an industry...and you will develop industry/company specific knowledge base....and you will know "roughly" when a company is under/over priced....comapre to historical average.....wait for the obvious pitch..
4). Lastly and most importantly...do your work and number crunching...no magic formula!!!!! and you learn while doing your work....read a lot like Buffett and Munger and all other value guys do.
8 of 9 people found the following review helpful
on December 5, 2006
In a perfect world markets would offer stocks at prices equaling their value, but they are not and do not. Value investors look for companies that are trading for less than their intrinsic worth. Stocks trading at low p/e ratios, low price-to-book values, or for less than their 'take out' price can be value candidates. Many of these stock prices represent temporary mis-pricings, and that is the point. Patience is a strategy that rewards the value investor as prices eventually adjust upwards to reflect their true worth.
Most investors looking for outsized gains focus on companies whose prospects are grand but also widely recognized. Growth investors and momentum investors are inclined to push prices well beyond a company's underlying value and ignore the importance of consistent, if not explosive, growth, and its appreciating assets. It is instructive that the author begins his review of a company by examining its balance sheet for what it is currently worth. By contrast growth investors will focus on a company's income statement for what it may become in the future.
Finding a "margin of safety" gives the value investor the confidence to weather the times when his style of investing is out of favor. That margin of safety is foremost in being able to buy solid companies on sale. Owning a diverse portfolio of easily understood businesses with predictable income and a pattern of insider buying or corporate stock buybacks re-enforces that margin of safety (I would also add-in companies that consistently increase their dividends). Identifying suitable value stocks means avoiding cheap stocks of companies that are over-leveraged, facing increased competition, dealing with unfunded pensions, obsolescence or accounting issues. These are the value traps that add nothing to your portfolio prospects.
Many of these ideas we have heard before. Browne's accomplishment is to present them in an accessible way. His long tenure as a career investor and money manager and his specific anecdotes got a long way in maintaining his credibility as an advocate of this investing style. Academic studies that support the value approach are noted in the final chapter and bibliography. This is a short, easily read, and informative introduction to the topic.
5 of 5 people found the following review helpful
on April 9, 2007
An investment book with not a single table or chart but which in its just over 160 mini book pages distills the lifetime experience of a seasoned US value investor, who applies a global mindset and in his younger days followed in the footsteps of Ben Graham and Warren Buffett in terms of his initial work experience?
Yes, that is exactly what makes this such a pleasurable and valuable read plus an easily learnt education in the basic concepts of value investing and the skillset needed which the writer believes anybody with general investment awareness can apply. Many of the other reviewers take issue with that there is nothing new - the truth is that the book is an excellent exercise in distillation of all his knowledge for people new to the concepts or needing an easy revision course. As the author states several times it is ultimately one of patience and accepting that this is a long term investment approach with "lumpy" performance in realising steady profits rather than graph like upward trends or "star manager" short term approaches and the related volatility they carry, given how the market values shares before recognising their true value by re-rating or being the subject of a bid.
The author has been a value based investor for nearly 40 years and is a partner in a successful US firm Tweedy Browne that only follows this approach. While some of the examples may seem likely to recur easily again (the more conservative accounting followed in certain non-US jurisdictions and the undervalue that produces) there is enough that is still current and valid to make this little tome a very valuable reference work for using by many amateurs like myself. Its mix of matter of fact examples and non-technical jargon make it a real and valuable find.
5 of 5 people found the following review helpful
In a pithy book, the author recounts some of the famous investors and how they applied the notion of "value investing". Readers with some exposure to the business media would most likely not find any new "value" in this book. It is not a collection of value trading/investing strategies, but more of a clarion call for believing in value investing. But then others have called value investing a potential suckers bet as well. Engaging, partly convincing, but short on new ideas or strategies. An absolute novice will find this book an excellent entry point to the world of value investing (perhaps thats the targeted audience of the book in the first place). Either case, the other "little" book - The Little Book That Beats the Market is a much better "value" for the reader.....