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SENSIBLE STOCK INVESTING: How to Pick, Value, and Manage Stocks Paperback – March 5, 2008
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- Rejects efficient market hypothesis, which states that stocks are always "properly priced."
- Doesn't rely on DCFA. (Even though I use it myself on companies I know well enough)
- His "black box" method of understanding financial inputs and outputs is easily understandable.
- Has a definite "value" tilt, which over the long run has proven to be the more successful style.
- Stressing continually that a stock's price is tied to its earnings.
- Gives historical averages for important financial ratios.
- Explains why a stock may have such a high P/E
- Goes against several value investors who say you should always be fully invested, by saying you should have some cash set aside (John Neff was big on this) if nothing looks attractive. Not a huge percentage of your portfolio, but 15% is fine.
- "Market timing," which is usually shunned by almost everyone, is given good treatment here.
- Uses technical analysis to explain WHEN to buy a stock. Despite most fundamentalist saying avoid technical analysis at all costs, a stock that has wild volatility in a given period is a much better buy in the long run when its purchased cheaper (see page 232). He also doesn't use it simply to buy a stock, but uses it WITH fundamental analysis.Read more ›
The author does a great job of smoothly guiding the reader through a potentially dry and difficult subject, without presuming any particular prior knowledge or experience. In fact, the book could almost serve as a textbook on how the stock market operates if it weren't such a quick and enjoyable read. The contents are well organized, and the writing is clear and to the point. The author effectively uses two real world portfolios to demonstrate the application of his techniques and at the same time buttress his credibility. There are also several helpful appendices, including forms for valuing companies and reviewing a portfolio, as well as a handy investment calendar.
One other thing that makes this book special is the feeling it conveys throughout that stock investing can and should be approached as an engaging, enjoyable hobby, like, say, belonging to a fantasy football league. I think an investor who maintains such an attitude is the most likely to stick with the sound techniques this book espouses while at the same time he or she reaps an extra dividend of happiness.
Points are also awarded to companies that have compelling stories. Is the company a dominant player in its industry? Does the company have pricing power? Answers to questions like these will begin to narrow the range of possible investment candidates. To assist in that effort, the book includes a "company story" questionnaire that investors will find useful.
For stock valuation, the system looks at historical and projected price/earnings, price/earnings growth ("PEG") ratios, and dividend yields. Discounted cash flow analysis is not part of the author's suggested approach, for reasons that the book discusses in some detail.
The book also includes a sample stock watch list and sample worksheets for monitoring portfolio performance and for tracking market indicators, all nicely tailored to meet the requirements of the time-pressed investor.
The section on portfolio management takes an in-depth look at company- and market-related issues that enter into the decision to hold or sell, and examples are used to illustrate key points effectively. There is also discussion of circumstances unique to the individual that may warrant a sell decision, for example, the need to rebalance for diversification purposes.
The author's suggested guidelines for cutting losses (10% - 15% decline on new purchases) may strike some readers as overly cautious.Read more ›
Most Recent Customer Reviews
Mr. Van Knapp is a regular contributor on Seeking Alpha. This book is a good primer, but his annual updates are even better.Published on April 3, 2014 by Penmanship
This is a great book for someone who is interested in the stock market but knows very little about it. A little outdated but still a good book.Published on December 14, 2013 by Derek Coleman
This book covers all the bases about investing in company’s. But it is far to time consuming trying to find all the data that is needed to rate each company. Read morePublished on December 23, 2012 by AB
If your looking for something that you can understand this is the book. I haven't applied the techniques to my own portfolio yet; but, certainly have a better idea about what I... Read morePublished on May 14, 2012 by Nick Danger
Awesome, Great writing, Cuts through the bull you come to expect when reading a lot of this type, Highly recommended!!Published on May 12, 2012 by D. Jacobson
This is a great book to remove the fear and confusion from stock market investing. All the terminology is explained. And understanding is the key to success. Read morePublished on February 20, 2012 by Aimee Elizabeth
This book must have been co-authored by Ben Stein Of the old "dry eyes.." commercials. A very boring book that is sparsly sprinkled with useful tidbits. Read morePublished on February 20, 2012 by Eddie Haskell
This book about Sensible Stock Investing seems to be a good read. I also recommend Stock Investing Simplified for readers interested in the subject.Published on December 28, 2011 by Choong