Value Investing: From Graham to Buffett and Beyond [Hardcover]

Bruce C. N. Greenwald (Author), Judd Kahn (Author), Paul D. Sonkin (Author), Michael van Biema (Author)

Book Description

Publication Date: May 31, 2001 | Series: Wiley Finance (Book 82)

From the "guru to Wall Street's gurus" comes the fundamental techniques of value investing and their applications
Bruce Greenwald is one of the leading authorities on value investing. Some of the savviest people on Wall Street have taken his Columbia Business School executive education course on the subject. Now this dynamic and popular teacher, with some colleagues, reveals the fundamental principles of value investing, the one investment technique that has proven itself consistently over time. After covering general techniques of value investing, the book proceeds to illustrate their applications through profiles of Warren Buffett, Michael Price, Mario Gabellio, and other successful value investors. A number of case studies highlight the techniques in practice.
Bruce C. N. Greenwald (New York, NY) is the Robert Heilbrunn Professor of Finance and Asset Management at Columbia University. Judd Kahn, PhD (New York, NY), is a member of Morningside Value Investors. Paul D. Sonkin (New York, NY) is the investment manager of the Hummingbird Value Fund. Michael van Biema (New York, NY) is an Assistant Professor at the Graduate School of Business, Columbia University.

Editorial Reviews

Review

"No one can doubt there's an urgent need to think clearly about investing, since many investors in Silicon Valley companies have suffered a stock market decline comparable to the Crash of '29. The burned investor could find no better starting place than this superb book by four New York City value investors, all descended from the master of value investing, Benjamin Graham....They have written one of the most intelligent overviews of investing I've ever read, combining analytical rigor with intuitive description." (DAVID A. SYLVESTER, Published Sunday, Oct. 21, 2001, in the San Jose Mercury News)

"...Greenwald is an excellent guide on this subject..." (Sunday Times, 21 October, 2001)

Review

Individual investors in the Internet Age are blessed with information. We also are cursed with too much of the stuff, from real-time quotes to streaming videos of fund managers. This info-clutter extends to books, and cutting through it can be difficult, even dispiriting, when you see how little thought goes into so many books. That's why I've spent part of the summer doing it for you. And the new title most deserving of your time is Value Investing: From Graham to Buffett and Beyond. Its authors, Columbia Business School faculty members Bruce C.N. Greenwald and Michael Van Biema and fund managers Paul D. Sonkin and Judd Kahn, aim to place their work next to Benjamin Graham's 1950 classic, The Intelligent Investor. My 1986 edition came with Warren Buffett's endorsement--"by far the best book on investing ever written." Value Investing is better. --Robert Barker, BusinessWeek, AUGUST 13, 2001

No one can doubt there's an urgent need to think clearly about investing, since many investors in Silicon Valley companies have suffered a stock market decline comparable to the Crash of '29. The burned investor could find no better starting place than this superb book by four New York City value investors, all descended from the master of value investing, Benjamin Graham.... They have written one of the most intelligent overviews of investing I've ever read, combining analytical rigor with intuitive description." --DAVID A. SYLVESTER, San Jose Mercury News, Oct. 21, 2001

Greenwald is a conventional economist (Ph.D. from MIT) who caught the value bug. He has updated and expanded Graham's ideas, and his summer seminars ($2,900 for two days) have become popular with everyone from well-known money managers to Columbia MBAs who couldn't get into Greenwald's class. But now there is a cheaper way to learn from Greenwald: He and three colleagues have just published "Value Investing: From Graham to Buffett and Beyond." Greenwald probably won't outsell Graham, but I think he ought to. --Paul Sturm, SmartMoney Magazine, June 19, 2001

"Whether you've been working with stocks for years or are a beginner looking for a book that goes beyond price/earnings ratios, you'll likely get something worthwhile out of the book. I certainly did." —Pat Dorsey, Morningstar, 11/7/2001

"I finally have a good solution for those wanting an updated manual on value investing. Value Investing [is] essential reading for anyone looking for a fresh perspective on analyzing companies and selecting investments. Those with a little background in finance will benefit from the book's clear prose and its profiles of eight successful value investors, and stock-market veterans will enjoy the detailed case studies in which Greenwald applies his ideas to specific companies.... It is one of the better books on investing to hit the shelves in a while. Greenwald's detailed analysis of Intel INTC is by itself worth the price of admission, and other examples are similarly illuminating. Whether you've been working with stocks for years or are a beginner looking for a book that goes beyond price/earnings ratios, you'll likely get something worthwhile out of the book." (Secrets of Successful Investing' by Pat Dorsey, Morningstar.com)

"Value Investing [is] essential reading for anyone looking for a fresh perspective on analyzing companies and selecting investments." —Pat Dorsey, Morningstar.com

"Sophisticated yet accessible to people outside the orbit of business schools, Greenwald's book is a lively defense of, and handbook for, value investing, complete with glimpses of how it's practiced by pros like Warren Buffett and Mario Gabelli." —TheStreet.com, November 15, 2001

See all Editorial Reviews

Product Details

• Hardcover: 312 pages
• Publisher: Wiley; 1 edition (May 31, 2001)
• Language: English
• ISBN-10: 0471381985
• ISBN-13: 978-0471381983
• Product Dimensions: 1 x 6.2 x 9.1 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 4.3 out of 5 stars  See all reviews (20 customer reviews)
• Amazon Best Sellers Rank: #112,283 in Books (See Top 100 in Books)

More About the Author

Bruce C. Greenwald ist einer der landesweit fuhrenden Okonomen. Er ist zurzeit Professor fur Finance and Asset Management an der Columbia Universitat. Er berat weltweit zu verschiedenen Themen wie Kapitalmarkte, Businessstrategien, Corporate Finance und Arbeitsleistung.

Most Helpful Customer Reviews

66 of 67 people found the following review helpful

5.0 out of 5 stars Value Investing in the 21st Century January 7, 2002

By Anthony J. Abbate

Format:Hardcover

I am a professional investor (CFA charter holder and portfolio manager) and would suggest this book for anyone interested in the value style of investing. I would not recommend the book for a novice investor since some terminology is not explained. (Perhaps read this book after reading and understanding Benjamin Graham's The Intelligent Investor.) However, the book is an excellent read for someone with an understanding of investing. The book is divided into two main parts: The authors' views of different ways to value a company and profiles of successful value investors.

I think the authors' Earnings Power Value (EPV) approach to valuing a company is cutting edge. (Basically EPV is a rehash of Enterprise Value.) Most investors tend to value stocks based on P/E ratios - only looking at equity in a company. However, the proper way to value a company is to look at its whole capital structure - Debt, Equity & Cash. EPV is a much better tool than the P/E ratio for calculating whether a company is undervalued.

The second part of the book that profiles a half dozen or so successful value investors is interesting. It illustrates there are many different ways to execute a value oriented approach. The profiles do not give any hard cut rules that each investor follows, but it does give you a general idea. (I have been successful at applying some of the ideas in managing my own account.) The only flaw of the profiles is the lack of any type of track record. It would have been helpful to list the year-by-year returns for each investor compared to an index. (i.e. S&P 500 Index)

Overall, it's a great book and it deserves a spot behind Ben Graham's Security Analysis and Intelligent Investor.

60 of 63 people found the following review helpful

4.0 out of 5 stars Successful, Long-Term Paths to Outperforming the Averages! October 29, 2001

By Donald Mitchell HALL OF FAMETOP 100 REVIEWERVINE™ VOICE

Format:Hardcover

Value investing is so unpopular now, that many do not know about this highly successful form of investing as practiced by its greatest masters. Value Investing helps to overcome that ignorance among the newest generation of investors. That is good and timely, because we seem to be entering a time when value investors often make their greatest coups.

If you believe that the stock market is totally efficient (current prices accurately discount everything that is or could be known about the company to accurately price a company’s securities), you will think this book is irrelevant. If you think that stock prices normally over or under value a company’s worth, you will find this book fascinating.

If you want to have a decent chance of learning how to outperform indexed mutual funds, this book is one of a handful that can help you. The methods and investors outlined in this book have successfully beaten the market averages for decades. So whether you try to do apply the concepts for yourself, or have your money invested by one of these top value investment managers, value investing is a discipline that can help you achieve superior investing results.

In some of the many back tests run in recent years to test for market efficiency concerning stock prices, simply buying stocks with low price/earnings and price/book ratios proved to outperform the market averages. More thoughtful stock-picking can do even better.

But the ideas in this book are far more important than that. Value Investing shows the many ways that situations where securities are underpriced can be found and exploited. The masters of this approach do a lot of fundamental homework, and look carefully from several different perspectives....

Many people identify value investing with Benjamin Graham and the early Warren Buffett. This book expands that perspective by also profiling Mario Gabelli, Glenn Greenberg, Robert Heilbrunn, Seth Klarman, Michael Price, Water and Edwin Schloss, and Paul Sonkin. You will find out about how they were educated, the value disciplines they have used, their long-term track records, and how they differ from one another.

You should realize that value investing is above-all an intellectual and cross-checking exercise (a bit like chess), far removed from emotion of day-trading and the thrills of following trading momentum. You need to be patient. Years can pass without any good opportunities arising. You will often sell stocks far before their ultimate peak. So you will have to think about how well the psychology of the careful hunter with one bullet in your rifle matches the way you like to do things. One of the hardest things to accommodate is that your results will look worst when everyone else is picking up easy money, mindlessly, by running with the herd of rampaging bulls.

As helpful as this book is, Value Investing has a number of weaknesses. First, new investors will probably get a little lost in the discussions. The authors usually begin at a level of understanding that people who have attended business school have. Second, you will find it hard to run down more details on concepts you don’t quite get. Third, you will get a flavor of what each investor has done . . . but not the full detail. So, think of this as a wine tasting. If you find some styles you like, plan to do more reading and studying. Fourth, if you were only taught the investing creed according to efficient markets, you will probably wonder what all the fuss is about. The book could have used more references to the new research that challenges the assumptions built into CAPM (the Capital Asset Pricing Model).

In your personal life, do you ever find it rewarding to get a great bargain on something of value that you care about? If so, value investing may be for you. The sense of satisfaction is similar, and the financial rewards can be greater.

Be cautious as you apply any investing method to outperform the market averages. Limit the size of your potential losses until you have fully developed your skill.

Look carefully, think . . . and be skeptical! There are many people trying to make the future seem rosier than it will be.

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51 of 57 people found the following review helpful

5.0 out of 5 stars Serves as Both a Great Primer & Also a Great Idea Generator March 3, 2002

By S. Schneider

Format:Hardcover

Ben Graham may have done for investing what Euclid did for geometry, but the Graham student must take a long and winding road to collect and organize Grahamian "theorems." Greenwald modernizes and thoughtfully organizes the value framework originally expounded by Graham, and shows how investors might take -and in the final section of the book, how several master investors DO take- Graham's notion of buying dollar bills for fifty cents and apply this central idea in creative ways to some of the less frequented areas of the market.

Greenwald et.al. show a terrific aptitude for remaining informal and conversational while maintaining brevity and orderliness. Neophytes are unlikely to encounter a clearer, more concise explanation of `discounting future cash flows', and most students of value investing will be well-served by Greenwald's order of equity valuation: (1) Asset Value, (2) Earnings Power, (3) Growth, all of which are clearly explained. Additionally, Greenwald discusses a useful addition to common metrics such as `net asset value' and `liquidation value' with the concept of `replacement cost'. Greenwald also acknowledges and thoughtfully attempts to quantify the value investor's less traditionally acknowledged principle of `franchise value', which he judiciously attributes to Warren Buffett as the latter's singular contribution to investment analysis.

The book's admirable brevity is also its primary shortcoming. Whereas Graham included senior debt and convertible debt vehicles both in Security Analysis and in his investment practices, this text is for all practical purposes only an examination of equities. If the authors of "Value Investing" ever opt to write about a value approach to bonds and other instruments, I'll bet they'd have a captive audience.