Top critical review
5 people found this helpful
Great for a novice but not a complete education
on July 23, 2011
I found this book to be an entertaining introduction into value investing approximately a year and a half ago when it came out. It is written in a style to motivate someone who might feel incompetent to try to invest their own money. The book gave me the confidence to start investing and with his advice, I made several very good investment decisions (buying Netflix at $75/share, for one... which I just sold at a 285% profit). I also made several unnecessarily risky investment decisions (buying Joe's Jeans at $1.90/share... which decreased by 50% but I am still holding on because I still believe in the company's long-term potential). My losses have been more than outshadowed by good picks.
I agree with another reviewer's post that the website does NOT deliver on its promises and also that I found his method for valuing companies to be overly risk-averse. If you stuck with his recommended margin of error, you would NEVER invest in the market. I found very few stocks that met the balance sheet test by his margin of error and those that met that test I decided against for other reasons (no barriers to entry, declining value as technology advances, etc.) I used his calculator online to value companies but only in relation to each other. I didn't wait for his target price to buy... because I never would have invested $1 if I had.
I am currently reading Ben Graham's Security Analysis, which I find much more useful. However, I don't know that I would have been ready to dive into Security Analysis as a novice and thereafter be so willing to experiment if I had read it a year and a half ago.
Thus, I recommend this book in general to other complete novices. It is good, sound advice and it is written in a way to explain complex ideas to someone without a finance education. However, I'd also recommend other sources like fool.com. Value investing information can be learned from other sources... this is just one of them. It isn't magic or a different type of value investing than Buffett or Stock Advisor on fool.com. I also recommend reading other things after you make a few stock purchases because reading this book will not be the only thing you need to read for investing long-term. It is a continual process of trial, error, study, testing theory, trial, error... you never stop learning.