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Invest Like a Guru: How to Generate Higher Returns At Reduced Risk With Value Investing Hardcover – April 24, 2017
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From the Inside Flap
The legendary value investor Warren Buffett is widely quoted as saying, "I would rather buy good companies at fair prices than buy fair companies at good prices." That simple rule of thumb built him a fortune and is now known as high-quality value investing. The fundamental key to amassing wealth with this type of investment strategy is to accurately measure price and quality, and Invest Like a Guru is your single-source solution to doing both.
Written by the founder and leading force behind GuruFocus.com, Charlie Tian, this groundbreaking guidebook puts the wealth-creation potential of high-quality value investing into the hands of investors with all levels of experience. With the same straightforward and accessible explanations that draw thousands of new users to GuruFocus each month, this step-by-step road map takes you through the ins and outs of determining if a company is a good investment and assessing a reasonable market price. The entire first section shows you where to look for companies with potential for high returns with minimal risk. It demonstrates how common publicly available business reports can shed a revealing light on the true health of a company, with specific advice for identifying signs of possible problems and promising breakouts. Illustrative examples from both research and firsthand practice clarify how the concepts and principles play out in the real world so you can implement them with confidence. Whether you're new to managing assets or need to upgrade your current strategy, this single resource sets you up for continuous success by giving you:
- Hands-on tools and convenient checklists for streamlining your company assessments and valuations
- Profit-maximizing guidance for avoiding costly mistakes, digging up unseen signs of failure, and keeping out of value traps
- A complete primer and operator's manual to the high-quality value investing strategy used all over the world to collect dependable returns on investment over time
Only fit companies can deliver sustainable healthy returns, and you can find them all with Invest Like a Guru.
From the Back Cover
Praise for Invest Like a Guru
"Charlie Tian has provided in Invest Like a Guru a valued checklist that derives lessons from a lifetime spent observing great investors at work. Dr. Tian provides tools that show how paying fair prices for businesses capable of reinvestment at high rates of return over time provides tax-advantaged, long-term compound investment returns."
Thomas A. Russo, Managing Member, Gardner Russo & Gardner LLC
"Invest Like a Guru is a valuable resource for any aspiring stock picker, and an engaging read for novice and seasoned investors alike. Charlie Tian skillfully dissects the methods of legends like Warren Buffett and Peter Lynch, as well as those of lesser-known but equally successful figures."
Scott Fearon, author of Dead Companies Walking: How a Hedge Fund Manager Finds Opportunity in Unexpected Places
"If you want to invest like a guru, read this book. It is full of insights and reminders of dos and don'ts."
Vitaliy N. Katsenelson, CIO, Investment Management Associates, Inc., and author of The Little Book of Sideways Markets
"Dr. Tian has read everything the best value investors have written and packaged this sage wisdom in Invest Like a Guru. Aspiring value investors should read it!"
Wesley R. Gray, PhD, CEO, Alpha Architect, and coauthor of Quantitative Value
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Top Customer Reviews
The author states to avoid cyclicals when investing in “the good companies”, and justifies by saying “holding cyclicals long term is not very rewarding.” The definition of cyclical is too broad in my opinion, and by excluding the sectors suggested you will miss some great opportunities. Instead of omitting entire sectors, recommend you look at the long-term revenue stream going back at least one recession. Judge for yourself if the revenue drop-off is a concern. Many companies will have a slight dip, but then continue strong revenue growth post-recession.
Overall a great book. I’m also a huge fan of gurufocus the website. No place like it.
Very practical, to the point, and easy to understand. I agreed with lots of things Charlie mentioned in the book.
I highly recommend it especially if you are a user of gurufocus.com.
So, I was thrilled to find out that GuruFocus founder Charlie Tian, PhD recently authored a book, Invest Like a Guru: How To Generate Higher Returns At Reduced Risk With Value Investing.
Tian doesn’t have a background in finance. He’s a scientist with a PhD in physics and an expert in fiber optics and lasers. Perhaps because of his unorthodox background Tian approaches the investing process in a scientific way, picking apart the strategies of successful investors to see how they work. Much of Invest Like a Guru – and GuruFocus too, for that matter – is focused on the strategies of wildly successful value investors such as Warren Buffett, Peter Lynch and Donald Yacktman.
The dominant theme of the book is quality. Buffett famously said “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” and Tian spends most of Invest Like a Guru expanding on that core idea. Chapter 6 is particularly useful as a 20-point checklist of criteria to look for when seeking out quality companies, including consistent profitability, capital efficiency and insider ownership.
But while Invest Like a Guru is full of solid advice in what to look for in a stock, it’s far more useful in telling you what to avoid. As a case in point, Tian dedicates a chapter to deep-value investing, and I personally consider this the most important chapter in the book. I myself have gotten suckered into deep-value plays in the past, and they rarely seem to work out as planned or on the timeframe I had hoped.
Deep-value investing is what Warren Buffett called “buying dollar bills for 40 cents” earlier in his career. Later, he mostly eschewed the strategy, calling it “cigar-butt” investing.
The rationale is easy enough to understand: It’s hard to lose money buying a company that is worth more dead than alive. If a company’s net assets are worth significantly more than its current market price, management could sell off the company for spare parts and deliver a decent profit to shareholders. And generally, that would be the right move. Remember, if a stock is trading that cheaply, chances are good that it is a company with very deep problems.
The problem is that it never quite works out that way. Monetizing assets is messy and complicated, and management has a vested interest in keeping the enterprise going. And the longer they do, the more value gets eroded.
As a case in point, consider the case of Sears Holdings. Eddie Lampert and Bruce Berkowitz – both respected value investors – have effectively bet their careers on Sears in the belief that its real estate and brand portfolios represented massive untapped value. They problem is that the Sears retail business continues to deteriorate around them. They may eventually unlock the value they had hoped to, but it will have cost them dearly in money, reputational damage and – perhaps most importantly – opportunity cost. Had they focused their energies elsewhere, they might have made far better profits with far less headache.
Buffett himself learned the same lesson with Berkshire Hathaway, which was a failing textile producer when Buffett originally bought it. Berkshire eventually failed, but only after Buffett had wasted untold time and energy (not to mention money) trying to keep it afloat. Buffett called his purchase of Berkshire Hathaway a “$100 billion mistake.”
Tian finishes the chapter with the simple observation that “There are better ways to make money.”
If you’re new to value investing, I highly recommend Invest Like a Guru. But even if you’re a seasoned investor, you’ll find plenty of insightful food for thought. My compliments to Tian on a solid addition to the value investor’s library.
Now I know why.
The book is targeted towards the newer investor. Nevertheless, it provides a very good framework of how to approach investing in stocks like a value investor.
Most books gloss over valuation and practical strategies, but Invest Like a Guru leads you down an informative and logical way. Sure, there could have been more details, but I understand that this book isn't meant for highly experienced investors.
If your expectations is of an academic book with tons of statistical research, this is not for you.
If your expectations is to find a valuable book that covers more than other typical "value investing" books, and help you gain footing, this is for you.
- easy to read and understand
- covers other important topics of value investing like different valuation methods, how specific guru investors invested which you can learn from
- practical examples to follow along