- Series: Contrary Opinion Library
- Paperback: 613 pages
- Publisher: Fraser Publishing Co.; Reprint edition (June 1, 1997)
- Language: English
- ISBN-10: 087034126X
- ISBN-13: 978-0870341267
- Product Dimensions: 6 x 1.2 x 9 inches
- Shipping Weight: 2 pounds (View shipping rates and policies)
- Average Customer Review: 4.5 out of 5 stars See all reviews (21 customer reviews)
- Amazon Best Sellers Rank: #60,392 in Books (See Top 100 in Books)
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The Theory of Investment Value (Contrary Opinion Library) Reprint Edition
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Top Customer Reviews
The book itself initially appears intimidating, as there are a lot of mathematical equations, but in reality, the math is nothing more than simple algebra, mostly different models related to computing dividend values going forward.
I found the book to be an interesting read, but it is highly theoretical in nature. The central theme of the book is that stocks are worth the present value of their dividends, paid in perpetuity. It does not discuss earnings manipulation, effect of dilution, securities with superior or inferior claim to payment, etc. Moreover, as Graham points out in Security Analysis, companies that have a high return on invested capital would be well advised to reinvest their profits, while less successful companies would be better off paying higher dividends (relative to book value). This would, of course, tend to make the practical application Williams' theory somewhat complicated, insofar as it makes computing future dividends more difficult.
Readers looking for a more practical guide to valuing stocks might be better served reading Securities Analysis by Benjamin Graham, or any number of more "practical" books related to stock market analysis, particularly as those analyzing financial statements to determine the intrinsic value of a company. Some readers might also find "The Aggressive Conservative Investor" by Marty Whitman and Martin Shubik to be a good read for a competing view, since the authors of that book take the position that, with respect to non-controlling shareholders, a company's stock is worth the net after-tax cash that they expect to realize in the future, whether from dividends, liquidating events, etc. However, if a reader is truly interested in obtaining an understand of how dividends affect stock prices, the book is a worthy read.
If you don't find the examples currently relevant, the reading portion is more like 300 pages. The examples, lengthy and detailed, are kept separate in the Appendices ... for an additional 300 pages of reading pleasure.
He emphasises the present value of dividends, as opposed to earnings, as the 'investment value' of an enterprise. He argues that, if you don't, ultimately, receive dividends, you've gotten nothing ... as earnings may or may not be re-invested well. Whether he'd agree or not, Buffett acts the same way by appropriating all excess earnings for his own re-investment. Whether you agree or disagree, it's worthwhile food for thought.
It's an interesting alternate view on 'value investing' from the Buffett Graham books recommendations.