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The Little Book of Value Investing Hardcover – September 22, 2006
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From Publishers Weekly
Browne's experience as managing director of investment firm Tweedy, Browne provides examples to support his lessons on value investing, a method of buying stocks that have fallen in price to earn the best return over the long term. Browne uses examples from successful investors (such as Benjamin Graham, Walter Schloss and Warren Buffet) to illustrate that value investing is the best way to make the most of one's investments. The zingy chapters titles ("Buy Stocks like Steaks...On Sale," "Around the World with 80 Stocks" and "Sifting out the Fool's Gold") are demonstrative of his penchant for metaphors, parables and anecdotes, which make this book as entertaining as it is informative. Browne's short chapters detail useful and time-tested concepts, including the significance of book value, which foreign economies are worth investing in, and who to watch for investment ideas. With detailed advice and thorough explanations, this book should prove an asset to both professional and amateur investors.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
"Fools would be well-served to place The Little Book of Value Investing on their holiday shopping lists". (Fool.com, December 12, 2006)
"sharply written...gets you fired up about buying stocks" (USA Today, December 4, 2006)
"If you are a value investor by temperament, you will (or should) find a lot that is persuasive in what Christopher Browne has to say about the craft of value investing in a delightful new book out this autumn...It is nicely written and utterly persuasive if long-term investment success is what you are after and your temperament is equipped to handle the psychological pressures of making non-consensus investments." (The Independent, November 2006)
"elegant new treatise on the art of value investing. . ." (Financial Times (UK), October 30, 2006)
"...easily digestible and shortish treatise for anyone who wants to try out this particular investment strategy". (The Wall Street Journal, October 10, 2006)
"After 37 years of practicing what Graham preached, Browne has distilled the creed into a disarmingly chatty primer. . ." (Bloomberg)
"one of the best guidebooks toward protecting and growing a retirement nest egg. This advice comes from a legend of value investing, and it’s presented with enough clarity that anyone can follow it." (Forbes.com)
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Just keep in mind that if you're looking for it to give you ideas on which securities to invest in and actual investment strategies/advice, you're not going to find it here. It's a basic book that explains the idea of Value Investing, and some of the basic methodologies behind it. It explains the history of it, the definition, and how to put it into practice. Any more details would have to require more advanced concepts which will not be covered.
Most investors looking for outsized gains focus on companies whose prospects are grand but also widely recognized. Growth investors and momentum investors are inclined to push prices well beyond a company's underlying value and ignore the importance of consistent, if not explosive, growth, and its appreciating assets. It is instructive that the author begins his review of a company by examining its balance sheet for what it is currently worth. By contrast growth investors will focus on a company's income statement for what it may become in the future.
Finding a "margin of safety" gives the value investor the confidence to weather the times when his style of investing is out of favor. That margin of safety is foremost in being able to buy solid companies on sale. Owning a diverse portfolio of easily understood businesses with predictable income and a pattern of insider buying or corporate stock buybacks re-enforces that margin of safety (I would also add-in companies that consistently increase their dividends). Identifying suitable value stocks means avoiding cheap stocks of companies that are over-leveraged, facing increased competition, dealing with unfunded pensions, obsolescence or accounting issues. These are the value traps that add nothing to your portfolio prospects.
Many of these ideas we have heard before. Browne's accomplishment is to present them in an accessible way. His long tenure as a career investor and money manager and his specific anecdotes got a long way in maintaining his credibility as an advocate of this investing style. Academic studies that support the value approach are noted in the final chapter and bibliography. This is a short, easily read, and informative introduction to the topic.
This book should not surprise anyone who has read Tweedy Browne's shareholder letters, but it does a great job of synthesizing Tweedy Browne's investment philosophy, while also providing more in-depth discussion of how to research stocks and understand financial statements.
Chris Browne is a Benjamin Graham disciple, and his firm was labeled as on of the "Superinvestors of Graham and Doddsville" by Warren Buffett. This book might be characterized as a shorter, more readable version of Graham's "The Intelligent Investor."
It's important for anyone who might buy this book to understand what it is, and what it is not. This is a primer on value investing as applied to individual equities, not an in-depth treatise on how to invest, allocate assets, etc. The goal of this book is to show why value investing works, how it works, and how to implement an investing process. It does not, nor is it intended to, provide in-depth discussion about how to value companies or financial statements or how to assess competition. Keep in mind that this is a 180-page book that takes 2-3 hours to read.
Experienced investors might find parts of this book to be somewhat basic. However, starting with the chapter entitled "Sifting Out the Fool's Gold," it really imparts a lot of information that everybody should know (in that case, how to tell if a stock that meets screening criteria is really a value stock or a dud). The chapters about financial statement analysis and how to analyze a company's future prospects were well-written and provide an outstanding roadmap to analyzing a company that even more experienced investors would do well to heed.
The 16-point checklist in Chapter 14 ("Send Your Stocks to the Mayo Clinic") is an excellent way of examining a company to determine its competitive position and future prospects. In my opinion, that checklist and the related discussion alone are worth the price of the book.
The discussion on insider buying and selling was particularly interesting. Although this is part of many investor's decisions, the book demonstrates just how important insider buying can be as a value signal. I intend to pay more attention to insider buying as a result.
One particularly interesting aspect of this book is its discussion of international value investing. That overview should provide investors with examples of why value exists overseas, but most investors probably can't master the intricacies of non-US accounting methods.
This is a great book for less-experienced investors, and contains a number of nuggets that may be of use to even highly experienced investors. Readers who want a more depth might like Martin Whitman's two books or "Security Analysis" by Graham. However, these books can be tough reads, and for novice investors this book is a great place to start. Other good reads for investors are Joel Greenblatt's "You can be a stock market genius" and Dreman's "Contrarian Investing: the Next Generation."