- Paperback: 613 pages
- Publisher: Fraser Publishing Co.; Reprint edition (June 1, 1997)
- Language: English
- ISBN-10: 087034126X
- ISBN-13: 978-0870341267
- Product Dimensions: 1.8 x 5.8 x 8.5 inches
- Shipping Weight: 2 pounds (View shipping rates and policies)
- Average Customer Review: 4.6 out of 5 stars See all reviews (19 customer reviews)
- Amazon Best Sellers Rank: #135,251 in Books (See Top 100 in Books)
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The Theory of Investment Value Reprint Edition
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Top Customer Reviews
The author defines the "Investment Value" of a stock to be the net present value of all its future dividends. This definition provides a measure of intrinsic value which is independent of stock market prices, enabling the investor to assess whether the current market price is high or low compared with the Investment Value of the stock.
A calculation of Investment Value inevitably requires estimation of factors such as future growth of earnings, the proportion of earnings that can be paid as dividends, and an appropriate discounting rate. The author does not shy away from making such estimates, and the book includes practical case studies for three current (in 1938) valuations, General Motors, United States Steel and Phoenix Insurance, as well as thr! ee retrospectives to 1930, AT&T, Consolidated Gas (Con Ed) and American and Foreign Power.
While the facts of these valuations are long ago, the methods are still applicable today. A great self discipline for investors would be to always prepare their own estimate of Investment Value before buying any stock.
The book is accessible to any general reader. A casual glance will show some apparently off putting algebra. This should be manageable to anyone who has finished high school, and arises only because in 1938 the author did not have the benefit of computer spreadsheets for doing growth projections and discounting calculations. The reader should find it straightforward to apply the author's methods with modern computing resources.Read more ›
The book itself initially appears intimidating, as there are a lot of mathematical equations, but in reality, the math is nothing more than simple algebra, mostly different models related to computing dividend values going forward.
I found the book to be an interesting read, but it is highly theoretical in nature. The central theme of the book is that stocks are worth the present value of their dividends, paid in perpetuity. It does not discuss earnings manipulation, effect of dilution, securities with superior or inferior claim to payment, etc. Moreover, as Graham points out in Security Analysis, companies that have a high return on invested capital would be well advised to reinvest their profits, while less successful companies would be better off paying higher dividends (relative to book value). This would, of course, tend to make the practical application Williams' theory somewhat complicated, insofar as it makes computing future dividends more difficult.
Readers looking for a more practical guide to valuing stocks might be better served reading Securities Analysis by Benjamin Graham, or any number of more "practical" books related to stock market analysis, particularly as those analyzing financial statements to determine the intrinsic value of a company.Read more ›
This is one of the books that influenced Warren Buffett. However, I would recommend this over Benjamin Graham's Security Analysis or Philip Fisher's Common Stocks and Uncommon Profits, which also influenced Buffett. There's a reason why "The Theory of Investment Value" is still in print almost seven decades after it was first published.
Amazon.com lists the length of this book as 240 pages, but it is really 564 pages long.
The real value of this dissertation-turned-book though is its general insights. Although Warren Buffett doesn't tout this book as often as Graham's "Intelligent Investor", you will find that he utilizes the insights from this book almost as frequently.
MSc student (economics & finance)
University of Navarra, Spain
Most Recent Customer Reviews
Classic for any person who want to get in deep with serious long term investment. Remember this was originally a doctoral dissertation and the language is influenced by that, as... Read morePublished 9 months ago by Andreas
A little more dated than I expected but the basics re market theory and investment basics are presentede in a clear manner. Read morePublished on March 15, 2014 by stuart brown
This guy knew his stuff ... in a deep way. At first, it seemed intimidating, jumping right into calculus formulae; but, it's readable, if dry, and the pace moved along. Read morePublished on July 16, 2013 by Discoveror
Improved upon my value investing prowess. Must read if you want to improve your skills. Highly recommended work for the novice investor.Published on March 21, 2013 by D. Dean
It's a very clear guide for establishing the value of a company. It requires certain mathematical knowledge. It must be studied as a text bookPublished on January 20, 2013 by NMM
What a classic! No wonder Warren Buffett was influenced by it. This book teaches investors how to value stocks with the discounted cash flow model. Read morePublished on August 14, 2009 by Mariusz Skonieczny