Customer Reviews

F Wall Street: Joe Ponzio's No-Nonsense Approach to Value Investing For the Rest of Us

5 star:		(17)
4 star:		(3)
3 star:		(0)
2 star:		(1)
1 star:		(0)

 

 

I'm certainly glad that the somewhat objectionable title did not dissuade me from reading this book. The title comes from the author's contention that the brokerage and mutual fund industry is driven by their own greed. Thus, their focus is primarily on sales rather than what should be their objective, namely identifying good investment opportunities that will enhance our investment returns. Although I have no disagreement with this viewpoint, I'm pleased to report that a relatively small portion of the book is devoted to this topic. Most of the book is a practical guide to value investing.

The primary thesis can be summarized as follows: "So the key to making long-term gains in the stock market is simple. Figure out which companies will grow and buy them at a cheap price." It is easy to agree with such an objective, but how do we do that? What distinguishes this book from the myriad value-oriented investing books now available is the author's emphasis on the importance of analyzing a company's cash flow characteristics. This is a welcomed viewpoint that transcends the traditional value investor's financial ratios of P/E, P/B, and P/S.

The author describes how Warren Buffett utilized the cash flow concept of owner earnings since the mid-1980s, even years before the cash flow statement became a required corporate quarterly financial reporting document. The author uses Enron to demonstrate the desirability of analyzing cash flows in lieu of reported earnings. The two primary analysis tools espoused by the author are "Cash Yield" and "Buy-and-Hold Valuation". Historical examples using Johnson & Johnson, Coca Cola, and Microsoft are helpful in answering the when to buy? and when to sell? questions. An additional benefit from this book are the interesting, common sensical insights in the areas of portfolio diversification and also "The Psychology That Will Drive Your Investment Success".

The improvements that would take the rating from four stars to five stars would be: (1) Less repetition of a few of the viewpoints provided; (2) Reduce the terminology confusion. For example, "Cash Yield" would be more appropriately termed as "Owner Earnings Yield". The same problem with clarity exists in use of the terms "Buy-and-Hold Valuation" and "Cash Return On Invested Capital"; and (3) Rather than relying solely on historical examples of how to identify buying and selling opportunities, it would also be even more useful to the reader if a specific example of how to use the tools to identify a current worthwhile investment opportunity was provided.

Joe Ponzio's "F Wall Street" is a true achievement in clarity and investing wisdom. Over the past 14 years, I have read virtually every book or article or essay written by or about Warren Buffett and Charlie Munger, and nothing captures the value-oriented, fundamentals driven "Focus Investing" approach of Buffett and Munger better than this well written and explained book. Ponzio, who fully gets the irony of his name being similar to the namesake of all pyramid schemes, knows of what he writes, having left high paying jobs on Wall Street disgusted with an industry that has lost any semblance of truly serving the average investor to start his own firm dedicated to providing honest, long-term financial advice to average and well-heeled investors.

Ponzio starts simple, explaining the integral parts of Buffett's "follow the cash" approach to screen truly good long-term businesses from weak ones, then goes on to nuts and bolts of how to properly value a business using discounted cash flow analysis -- all in accordance with Buffett and Munger's advice. He then goes on to analyze how to execute another favorite Buffett approach -- merger arbitrage or "workouts" -- in a way that makes this somewhat more advanced tactic accessible to the more ambitious individual investor.

What sets F Wall Street apart from other books is it's clear to read style, and its ability to boil down essential and somewhat complicated value-investing concepts into easy to understand principles -- much like Buffett himself in his annual letters to shareholders. But Ponzio is not just another commentator -- he is a true practitioner of Buffett's art, with a comparatively short-term (a few years) but so far impressive results in his portfolio based on the approaches espoused in the book. More on his portfolio can be seen on his blog[...]. The blog offers much of his principles for free and is worth visiting, but the book is well worth the price for bringing all the principles together in one place and bringing the reader through the base-logic all the way through the more advanced concepts in a logical progression.

In my view, having read all of the books on Buffett from Hagstrom to Mary Buffett to Lowenstein, this book does a better overall job of capturing the nuts and bolts of Buffett and Munger's approach, though the others are worth reading as well to round out one's knowledge of Focused Investing.

I am in no way affiliated with Joe Ponzio or his firm. I am simply very impressed with someone who has so well captured Buffett's "Focused Investing" approach, and shares Buffett's passion for educating his fellow man.

I have read many books on investing; my favorites include Graham's Intelligent Investor and Security Analysis as well as Fisher's Common Stocks and Uncommon Profits. This book ranks right there among them. In a clear, concise manner Mr. Ponzio takes the reader through the steps required to understand investing, value businesses, and purchase securities. Appropriate for beginning investors, but with valuable information for even the most seasoned- I highly recommend this book! If you are looking for a place to start learning about investing, purchase this book and Graham's Intelligent Investor. If you have read a ton of books about investing, you still need to read this book!

If you still think that your broker or mutual fund has your best interest in mind, this book will be a wake-up call for you. The author states that these companies preach that in order to become wealthy and have a nice retirement, people need to save and invest. While this may be true, merely saving and investing does not get you there, unless your investments actually perform well. The author talks about how Wall Street want you to make just enough so they can keep your account, but they take the rest of the profit for themselves.

This book gives readers advice that Warren Buffett followed for years. Invest in stocks as if you were investing in businesses, not just ticker symbols. Value a business so that you know if you are getting a good deal buying a stock. I highly recommend this book to readers who want to take financial matters into their own hands.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

Joe does a great job describing how value investing works and makes it easier to understand for both beginners as intermediate investors. His writing style is funny but straight forwarded. By using some good examples he shows the reader how value investing works and how you can reduce risk using the Margin of Safety.

What people and/or Wallstreet might suggest -they only want to rip you off- value investing is the best LONG TERM investing strategy if applied correctly. Whether it was 70 years ago or nowadays. I'd suggest reading this one, and then continue reading "The Intelligent Investor" and "Security Analysis - the 1934 version".

By applying the knowledge described in the books above I've changed from a (swing)trader to a value investor and managed to retrieve awesome results investing in FDO, AAPL, KO, ARO, SBUX, PNRA (since 2008/2009). As a value investor you can buy and hold a wonderfull company forever, or buy at a significant discount and sell when the price (almost) reaches the intrinsic value again.

First, I should start off this review by stating something that is plainly obvious. The successful investor is a person who has the ability to think independently, and one who evaluates the merits of a potential investment from the facts and figures, coming up with an investment rationale that is logical and the product of his or her own original analysis. The investor succeeds based upon whether his or her individual reasoning and logic is valid, not whether he or she followed the correct steps, followed the crowd or used a specific formula to value what the stock is supposedly worth.

From reading F Wall Street, I get the sense that Joe is one of these rational, independent-minded investors. He understands the standpoint of value investing in a modern sense, as advocated by Buffett and others such as Glenn Greenberg, meaning that he evaluates businesses for what they are worth "alive", as profit-producing engines that create long-term wealth. This was refreshing, because most of the literature out in the market today either comes from a Graham and Dodd "what is it worth dead on the table?"/liquidation value philosophy (which doesn't help those wanting to learn how to go about investing in good businesses at good prices), or from academics such as Bruce Greenwald or Joel Greenblatt who advocate methodologies that do not cut to understanding the buying and selling of equities as a business, but as statistical phenomena that produce profits through the evaluation of formula and ancillary criteria. Not that what they have to say is invalid, but it is as if they have all of the pieces here and there but do not put them together to build a complete understanding. There is too much sidetracked academic rambling, still paying a halfhearted due to the idea of an "efficient market", market risk premiums, betas, backtesting of various formulas in the search for the "God formula" and so on. Yet, all of it seems unproductive from an educational standpoint in really wanting to learn about how to value a business (remember Buffett's sage advice: "Beware of geeks bearing formulas.")

Joe looks at companies from an evaluative, bottom-up standpoint, starting with the income statement and going from there to calculate cash flow and owners earnings, and explains what these are and why they are important to the business owner. It is almost as though you can read this book alongside Buffett's annual reports, and come away with a very good understanding of how to evaluate companies. Once the reader and truly understand what Buffett and Joe are talking about, he or she can go about doing what Buffett advocates: go through the Moodys manual (or an online stock listing nowadays), starting with the A's and ending with the Z's. (Hey, no one said investing was supposed to be easy.)

A couple of caveats to this book however: while I feel that he is better equipped to write a book like this, there are points where it seems like he is saying so much at once that it doesn't come out right, and seems like he is rambling a bit. I presume that a later edition will be more concise and thoroughly edited in this regard. As well, I agree for the most part with his fundamentals, but he seems to sometimes take things a bit farther than they really should be used in an analytical sense. Case in point: his advocacy of using CROIC (an efficiency ratio that one can use to determine management's effectiveness) as a growth rate in valuing a company's cash flows.

Overall, though, it is a very good book for those who did not go to Columbia Business School and want to learn more about equity valuation. I would just take everything with a grain of salt, and like the analyst does in valuing a security, evaluate what is said on its own merits with respect to logic and reasonableness. This is where the "rubber meets the road," and this is also what separates the intelligent investor from the rest of the pack.

This not only makes money, it is "safe" (caution that word has many meanings). It is a simple theory. Buy low, sell high. But it's not a guessing game, this could mean buy at 50 and sell at 40. Or buy at 40 and hold at 50. Or buy and hold. Or buy at 50 sell at 90. How do you know?

Why the disconnect? It's all about value. If a company is undervalued at 50 and some fundamental change happens that causes the value to drop, it's simple -- you sell. This stops you from losing money.

In most cases the reverse will be true, you will learn how to value the company and know when to buy more, sell, or hold based on the value of the company. No more guessing games.

I follow a lot of value investors that I respect for their analysis. The one thing I found in common with almost all of them -- they list this book as a major influence on their thinking. This is Buffett/Graham explained in methods and evaluation so a non-accountant can understand it.

This is good straight shooting book for novice investers, actually some so called pro's should read this.

It breaks investing down nicley and simply, by stating cash is what matters and ofcourse it does, you have to part with cash to buy this book, a whole $10!

If you want to be an active invester this book is very good a setting out, what is needed what to look for and what you need to study and read next to continue this journey of financial independence.

great book! Follow his advice put the hard work in, stick at it and you'll get back what you put in.

This is a great book for new and veteran investors. It breaks everything down to where it makes sense. The cash flow technique is really helpful and is done in detail. The author does it in a way that it doesn't limit it to just his method but allows you to understand the principals behind it so you can apply it your own way. It belongs with the other investing books you should get such as One up Wall Street by Peter Lynch, Common Stock and Uncommon Profits by Philip Fisher, The Intelligent Investor by Benjamin Graham. These books get to the root and prinicpal of what investing should be and leaves room for the reader to use it how they should apply it. The book is a great foundation for new investors and helps you understand the method of legendary investor Warren Buffet. Anyone who picks this book up will surely learn something useful one way or another.

I have to be honest- when I purchased this book I had no idea who the author was, I just liked the title after the year I have had in the market. To my surprise- the book was well written and made common sense- something not usually known or practiced on Wall St. From a basic investor to a Wall St expert (I'm somewhere in between!) the concepts on this book which include value investing,intrinsic value, and what type on investor are you really hit home with me. An easy read and a book I would invest the $15 in!