33 of 36 people found the following review helpful:
5.0 out of 5 stars
Value investing is a era of day trading -- how refreshing!, August 19, 1999
By A Customer
This review is from: Wall Street On Sale (Hardcover)
Part of my summer reading list is to read more about value investing. I highly recommend Timothy Vick's book; "Wall Street On Sale". Congratulations on a great read. Very good use of Buffett quotes throughout. Excellent investment primer as well as a refresher for experts. One of my favorite sections is how this book is one of the few to point out how corporations resort to financial trickery and deception.
Mr. Vick helped me realize that I have always been a `value' investor with basic principles instilled during childhood. Before reading this book I didn't realize that I have been a value investor my whole life. It's in my bones. And as Tim points out so well, why shouldn't the virtue of value naturally extend to Wall Street and our investments.
Chapter Two points out that when you switch long distance phone companies to get the lowest rate, use two for one coupons, go to matinee movies, recycle, purchase used cars, self park instead of valet, visit the outlet mall, prepare your own taxes, or use a discount broker, you are value investing.
Tim points out that `cheap investing' isn't the same as `value investing'. Mr. Buffett calls this `cigar butt investing'. Buying a stock in order to get one or two more puffs of earnings. Something he used to do and did with the original Berkshire Hathaway. Berkshire Cotton Mills turned out to be a cheap investment or cigar butt investment, not a value investment.
This book does an excellent job explaining that diversification and dollar cost averaging both lead to mediocrity.
How about this gem: "The stock market is like perfume. The more you pay for it the better you feel."
Chapter Four does a great job attacking the Efficient Market Theory. More professors of finance need to read this book.
Chapter Six talks about Decade Trading in a day trading world. Tim is a proponent of investing like a businessperson, like you're buying a part of a business. This section has excellent data and research to debunk market timing. Good Seven Commandments of Investing but he forgot the Eighth Commandment: remember taxes. Value investors by their very nature must consider the tax impact of their investments. Whenever you can defer taxes you are adding to the return of your investment decision. Excessive traders pay 3% of their annual returns on average to the government.
In Chapter Seven Mr. Vick talks about buying all of a business, both private and public. Mr. Buffett defines this activity as a negotiated purchase. In other words the price isn't set by the stock market but rather negotiated between buyer and seller.
Dividend decisions in Chapter Nine are also a function of management's ability to allocate capital. If management can get a better return by retaining a $1 of earnings and increase intrinsic value by more than $1 it should. If however $1 of retained earnings doesn't increase intrinsic value of the enterprise by at least $1, earnings should be returned to the shareholders in the form of dividends.
Chapters Nine, Ten, Eleven, and Twelve simplify corporate accounting with excellent comparisons. The author compares a corporate income statement and balance sheet to an individual's income and net worth statement. In these chapters, Tim takes Ben Graham's concepts of security analysis, which can be complicated to some, and makes them easy to understand.
Chapter Thirteen explores the intangibles behind great investments. It teaches that value investing isn't just about the numbers. "Wall Street On Sale" does an excellent job examining the numbers AND in this chapter the non-numbers behind the enterprise. Management leadership is difficult to value. One of Mr. Buffett's strengths is deciding if a manager loves money or the business.
Berkshire is interested in acquiring business with management already in place. It is one of the few companies that have well-developed and well-publicized acquisition criteria. Berkshire's wise acquisition policy is different from most. Other companies need to acquire for competitive and growth reasons along their product line. Berkshire is in the enviable position to acquire whatever business that adds shareholder value. Notice that shareholder `value' and intrinsic `value' have the word `value' in them.
Chapter Fourteen presents great arguments against diversification and for concentration. Diversification equals mediocrity. Successful investors are discriminating: they avoid buying anything and everything.
How about this quote on page 249: "If you still like the company after the stock falls, you should like it more at a lower price and add to your position."
Figure 15-2 could also demonstrate how much of Berkshire's marketable securities are in a concentrated portfolio (3 securities equal 62% of the portfolio). This figure shows buy and holds only.
Also the appendix has an excellent list of stock information of the internet. The recommended reading list should include the vchairman's letters (the only ones widely quoted enough to be copyrighted).
The book finishes with a bang. Buffett's seven key elements of successful value investing restated by Tim Vick from the 1987 annual report. They are priceless.
(1) View yourself as a business analyst. (2) Don't be swayed by share price movements. Over time price follows the company's growth. (3) Don't be a price taker in the stock market. Price and value aren't always the same. (4) The market doesn't always properly value businesses. (5) Wall Street is designed to sell you something and make you trade. (6) Successful investing is just old fashion financial statement analysis. (7) Being a value investor sets you apart from, but ahead of, the crowd.
If you are just starting out in investing or are a seasoned professional, I highly recommend this book.
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35 of 44 people found the following review helpful:
3.0 out of 5 stars
The average investment book..., January 14, 2000
This review is from: Wall Street On Sale (Hardcover)
Actually, to think that this book will teach you a whole lot about Warren Buffett's investment technique is significantly misleading.
I know many people have found this book more than just fascinating and it's probably bcoz this was the first value investing book they read rather than anything else.
This book, describes the many people who've had success with buying stocks at decent prices (hence, the VALUE investment idea) and how you too, as a reader can do the same. Then the author goes on to talk about Buffett, the billionaire investor who roughly made $8,000 plus out of every $1 invested over a 40-year period.
Now, to take this book as an intro to the technique is fine, but to take it as a "How Buffett did it book" is totally misleading.
You see, Buffett investing is about the margin-of-safety principle (essentially, making the purchase price so good even a bad sale yields satisfactory return), it's about his former lecturer Ben Graham and Mr. Market, it's about the temperament of investors, the attitude towards bear markets (falling markets), it's the pitches, strikes, and when to swing your money bat and most importantly, it's about the patience, rationality and discipline.
It's not just buying cheap. Buffett investing is about value NOT in the sense which the author of this book preaches. It's so much more than that.
I've come to understand Buffett investing as creating the most impressive investment record possible, consistently, over the long-term. To do that, you need to have some idea of how Buffett felt when he's buying and when other investors and the whole stock market is selling. It's about how to minimize your risk of losing money in a stock market crash, by doing this thing he calls "Workouts". And it's not about avoiding technology stocks either, that's a personal thing. Many argue that Buffett's techniques won't get you far these days which I think is a bit of a short-term thinking. Buffett's technique can be applied to technology stocks if you really understand the business. "Remember, what lies under every ticker symbol and stock tape is just an ordinary business!" Now, as a Buffett investor our task is to separate the myths and the facts and then, step on the plate... to swing at the perfect pitch. You don't have to buy them at rock bottom prices, they just have to be selling at a price you think is below it's intrinsic value.
Now, of course, more on intrinsic value if you read Hagstrom's first book, "Buffettology" by Mary Buffett and several other books. From my experience, you really need to read just a few books to be able to invest like Buffett and that the secret to this whole idea lies only in a handful of quotes. I'll leave you with one of my favorites,
"You don't need to know a person's exact weight to tell if she was fat.." -- Ben Graham
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6 of 7 people found the following review helpful:
5.0 out of 5 stars
Wall Street on Sale is the BEST-- by a longshot!, June 2, 1999
By A Customer
This review is from: Wall Street On Sale (Hardcover)
For more than two years, my husband and I have been searching for a one-stop shop primer on how to pick a good stock and build a portfolio. Wall Street on Sale is it. It is carefully researched, answers every question an investor wants answered (how to find value, how long to hold, when to sell, how many stocks to own, how to maximize returns, etc.), and is wonderfully written. I have also read some of the books on Warren Buffett and value investing and found Wall Street on Sale to be the BEST- by a longshot. The author's early chapters on contrarian investing and ignoring the market are as potent and groundbreaking as you will find. His later chapters on valuing companies give even more detail than anything Peter Lynch has written. A lot of investing books seem to be written just to build the author's fame or to entice you to use a system that may work short term. I got the impression from reading Wall Street on Sale that the author truly wanted to help investors understand the complexities of the market. This book will convert any reader instantly to the value side. Anne Dennison, Tinley Park, Illinois
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