Value investing from graham to buffett and beyond ebook library

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value investing from graham to buffett and beyond ebook library

From the "guru to Wall Street's gurus" comes the fundamental techniques of value investing and their applications Bruce Greenwald is one of the leading. Value investing: from Graham to Buffett and beyond. by Bruce C Greenwald; OverDrive, Inc.,. eBook: Document. English. Hoboken, New Jersey: Wiley. Publisher: Hoboken, New Jersey: John Wiley & Sons, Inc., Series: Wiley Finance, Edition/Format: eBook. APEXINVESTING REVIEWS Complete Basics through innovative say that to put tech companies. To connect took about inadvertently block these options the following 20 20. Better manage Delivering a gains high secure environment.

Prior to joining the faculty of Columbia, he was a principal at the RONIN Corporation, a management consulting firm, and the cofounder of several technology companies. He has a PhD from Columbia in computer science. Bruce C. Greenwald , Judd Kahn , Paul D. Sonkin , Michael van Biema. From the "guru to Wall Street's gurus" comes the fundamental techniques of value investing and their applications Bruce Greenwald is one of the leading authorities on value investing.

Some of the savviest people on Wall Street have taken his Columbia Business School executive education course on the subject. Now this dynamic and popular teacher, with some colleagues, reveals the fundamental principles of value investing, the one investment technique that has proven itself consistently over time.

After covering general techniques of value investing, the book proceeds to illustrate their applications through profiles of Warren Buffett, Michael Price, Mario Gabellio, and other successful value investors. A number of case studies highlight the techniques in practice.

Paul D. Fish Where the Fish Are. Valuation in Principle Valuation in Practice. From Book Value to Reproduction Costs. Advanced Search Find a Library. Refine Your Search Year. Your list has reached the maximum number of items. Please create a new list with a new name; move some items to a new or existing list; or delete some items.

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To determine the real value, value investors usually ignore the stock price and look at the entire company. The dream of value investors is to find a good stock that the market dramatically undervalues. Thus, many value investors are bargain hunters who are seeking the most bang for their buck.

Many value investment strategies emphasize the intrinsic or real value of stocks. A popular value formula is to calculate the amount of cash a company generates. To determine the intrinsic value , investors examine a wide variety of metrics.

Value investment flies in the face of many modern notions about capitalism. Many value investors reject the efficient market hypothesis and believe the markets are usually inefficient and inaccurate. Another popular belief of value investors is that investment industry professionals and the media cannot be trusted. These investors think the only reliable information about a company is the financial data.

They ignore everything else. A classic value investing strategy is to seek companies with a share price that is way below the intrinsic values per share. Most value investors are focused on the company fundamentals; this means they focus on the financial reports, income statements, balance sheets, etc. Essentially, there are numbers of people who use financial data to help them estimate intrinsic value.

Value investing is often confusing because there are many such financial metrics and calculations. The value gurus add to the confusion by emphasizing different sets of numbers and factors. Most value investors practice a buy and hold investment strategy. In buy and hold, a person purchases a stock and keeps it for a long time. The classic value investing idea is that you will not lose money on a stock that holds its intrinsic value. The usual value investing challenge is to identify the low-priced undervalued stocks with high intrinsic value.

Most value investors can be considered contrarians because they assume popular wisdom about stocks is wrong. A good way to think of value investing is that it believes the market is always wrong. Go Pro Now. The British-American investor and economist Benjamin Graham is widely viewed as the father of value investing. Graham first laid out his principles of value investing in his textbook Security Analysis. Graham popularized value investing with his classic stock investing book, The Intelligent Investor.

Both books are based on stock investing lessons Graham and others taught in a popular Columbia Business School course in New York City. The Intelligent Investor first outlined what is now widely viewed as value investing. Market and group investment. Market when he was selling valuable stocks at low prices. Graham believed the ability to make money is the only criteria by which you should judge stocks.

To identify such stocks, Graham invented what he called the group approach. In the group approach, you identify criteria for undervalued stocks and search for equities that meet that criteria. Graham attracted attention for claiming that stocks picked with his group approach gained value at twice the Dow Jones rate.

Graham was an active investor who worked on Wall Street for decades. Graham was openly critical of the stock market, most investors, and corporations. Today Graham is best known as the primary teacher of his most famous pupil, Warren Buffett. The key criteria of a Graham value investment are that a company needs to be cheap and make a lot of money.

Unlike Graham, Buffett is willing to pay higher prices for companies he considers good. Buffett will buy more expensive stocks that meet his criteria. Another difference between Warren and Graham is that Buffett will buy large amounts of what he considers good stocks. When he analyzes a stock, Buffett pays the most attention to its cash flow and assets.

Buffett will pay extra for companies with a healthy rate of growth like Apple. Berkshire Hathaway will sell companies with a slow rate of growth. Another Buffett belief is that investors need to keep large amounts of cash on hand. Investors need lots of cash so they can take advantage of opportunities fast, Buffett teaches. Investors also need cash to cover emergency expenses and to borrow against them.

Like Graham, Buffett is a contrarian famous for his skepticism of the market, the media, investors, and the investment industry. Buffett dismisses investment fads, popular wisdom, professional fund managers , and new technologies. In recent years, Buffett has become increasingly critical of the wealthy and the American political system.

Buffett is a celebrity who has achieved rock-star status among investors. Buffett does not take a lot of risks in his investing. He makes large investments in stable, simple businesses, including insurance, consumer goods, retail, finance, and media. Too many people are focused on short-term trading to make money, which is much riskier. Many people, however, swear by Buffett and his investing wisdom.

Most value investors base their investing decisions on three basic concepts. Each of these concepts is a big idea that underlies value-investment philosophy. Instead, Buffett values companies he invests in as if he was buying the entire business for cash. Once these investors calculate intrinsic value, they compare it to the share price and market capitalization. If the intrinsic value is substantially higher than the market capitalization, you can consider the company a value investment.

Buffett arrives at the intrinsic value by studying financial numbers and doing real-world research on its business model and competitors. A simple way to think of intrinsic value is the cash value of everything a company owns. A slightly more complex estimate will include cash flows or projected cash flows. Most value investors use several methods of analysis to arrive at intrinsic value.

There is no single best formula for intrinsic value. Instead, investors usually base intrinsic value on the calculation that best fits their belief of what makes a great company. In classic value-investing theory, the margin of safety is the level of risk an investor can live with. The margin of safety is an estimate of the risk a stock buyer takes. This metric the single most significant valuation metric in our arsenal as it is the final output of detailed discounted cash flow analysis.

Another name for the margin of safety is the break-even analysis. The break-even analysis is the share price at which you can begin making money from a stock. Today the Margin of Safety is one of the key concepts of value investing. There are many risks that fundamental analysis cannot estimate, including politics, regulatory actions, technological developments, natural disasters, popular opinion, and market moves. The margin of safety you use is the level of risk you are comfortable with.

If you are risk-averse, you will want a high margin of safety. A risk-taker, however, could prefer a low margin of safety. Classic fundamental analysts examine the qualitative and quantitative factors surrounding a company. Both value and growth investors use fundamental analysis. To understand value investing, you need to have a good grasp of fundamental analysis, intrinsic value, and margin of safety. Not all value investors use these concepts. Buffett will occasionally purchase stocks he likes, even if the market price exceeds the margin of value.

Investors need to understand these concepts are theoretical guidelines and not concrete rules. There will be many stocks that make money but violate some value investing concepts. There is no universally best method of valuing a company in value investing. Value investors, instead, use a variety of valuation methods. There is no perfect method for valuing a company. Most value investors have a favorite method, but their choices often reflect preferences or prejudices rather than results.

Value investing is ultimately a matter of strategy. Thus, we can think of value-investment masters like Buffett and Graham as strategists. The Graham strategy is to seek stable low-priced companies that generate lots of cash. Graham and Buffett ultimately diverged a little in their strategies. Buffett considers cash flow, growth, and the margin of safety important. Graham considered the margin of safety as the most important aspect of value investing.

In the Buffett strategy, cash flow is a tool for growth. A cash-rich company can afford to upgrade its technology, expand into new markets, develop new products, increase marketing, and borrow large amounts of money. Thus, a cash-rich company is more likely to grow. Buffett designed the strategy of buying growing companies to ensure growth and cash flow. Graham designed his strategy to create a wide margin of safety by spreading the investment over many stocks. The Buffett strategy generates cash by concentrating investment in cash-rich companies.

Dividend value is used by both Graham and Buffett because it ensures a steady flow of cash. The difference is that Buffett and Graham use the dividend value differently. Graham strategists view a high dividend yield as a means of increasing the margin of safety.

Buffett strategists see the dividend yield as cash they can use to fuel future growth. Franchise value is key to the Buffett strategy but ignored in the Graham strategy. Buffett will pay more for companies with strong franchises because he thinks strong franchises make more money. In the Graham worldview, the share price can tell you if a company is overpriced or underpriced. Graham strategists think of share price as a measure of the margin of safety. In the Graham world, the higher the share price, the smaller the margin of safety.

A popular view of Graham investors is that investors pay less for stocks they dislike and boring stocks. Modern value investors use the slang of sexy and unsexy stocks. These people seek good stocks that the market does not appreciate. A Graham value investor could buy an oil company instead of a tech stock, for instance.

The oil company is old-fashioned, boring, and offensive to some people, but it makes money. The tech company is attractive and flashy, but it could make no money. Buffett thinks that popular opinion and the media create market irrationality. Buffett watches the news and looks for bad news about good companies. Buffett will sometimes buy companies after a well-publicized scandal.

The public turned on Bank of America after news reports alleged some of its employees were writing fake loans to get commissions. Buffett bets that most news about companies will be inaccurate, limited, short-sighted, biased, and incomplete. Buffett tries to capitalize on that lack of information by having more information than the rest of the market.

Buffett reads financial reports; instead of newspapers and blogs because he thinks financial data gives him an edge over other investors. Buffet assumes that most investors do a poor job of valuing companies because they rely upon inaccurate media reports. The most popular value investing strategy is diversification, which they design to create a high margin of safety. Diversified investors assume most people make poor stock choices.

The diversified investor tries to counter the poor stock choices by buying various stocks that meet his criteria. A diversified investor who seeks dividend income will buy high-dividend yield stocks in several industries in an attempt to create safer cash flow. A diversified investor who seeks franchise value will buy stocks in companies with high franchise values. Buffett buys a variety of growing cash-rich companies to create high cash flow. B will always generate some cash from its many businesses.

Understanding the strategy is the key to learning value investing. All good value investors are good strategists. The ultimate goal of a successful value investor is to design and implement a successful value investing strategy. The fact is, it is great to learn and understand the history of value investing, and grasping the concepts allows you to decide if you want to be a value investor or not.

Mar 25, Alex Song rated it liked it. I read the first half of this book, put it down for a few months, and then picked it up again. I probably shouldn't have done that. First half: great. Second half: not great. First half basically reads like a textbook. A good discussion of various methodologies and value investing strategies. Second half is very little value-add. They felt stale. I wonder if any of them are still I read the first half of this book, put it down for a few months, and then picked it up again.

I wonder if any of them are still actively investing and how they are able to keep up. Dec 27, Hisham Mannaa rated it it was amazing. Chapters 4 to 7 will change the way you value companies forever! Mar 28, Harikrishnan Thamattoor rated it really liked it. A good read - The foundation of the book is laid based on the concepts introduced by Benjamin Graham - who is commonly credited with establishing Security analysis as a firm discipline.

The author tried to build on the works of Benjamin Graham and on that of his successors and incorporated the advances in value investing that have appeared over the last 40 years. The book is divided into three parts. Part one is the introduction, part two is the crux of this book. This book is an interesting read because it gives fresh perspective on how to analyse a company in a different manner compared to the traditional DCF approach. I really enjoyed the first edition of this book, which I read almost 20 years ago.

The two approaches to valuation prescribed in that edition were refreshingly straightforward. The most conservative approach was the asset-based valuation. The next-most conservative approach was the earnings power-based valuation. Calculate normalized earnings assuming no growth and divide by the cost of capital.

Both approaches were to-the-po I really enjoyed the first edition of this book, which I read almost 20 years ago. Both approaches were to-the-point and practically-applicable. Intrigued, I bought a copy. Long story short -- I think this second edition -- in particular Chapter 8, the new chapter on valuing growth stocks -- completely loses the plot. At the very least, it serves to remind the reader that the five! What follows is a very long review.

Let me get straight to the point: no one who actually runs money for a living evaluates growth stocks in the manner prescribed in Chapter 8. I find this to be ridiculous. Any attempt at valuation will be subject to a significant degree of error. The idea is not total precision. The DCF is king because it is the literal definition of valuation: a company is worth the sum of its future free cash flows, discounted back to the present.

Full stop. The earnings power value approach prescribed earlier in the book IS a DCF -- just one that assumes no growth! Moreover, the earnings power value approach suffers from huge variances depending on the discount rate chosen. Yet the authors are OK endorsing it.

Sadly, the proposed replacement methodology is limited to the point of being useless. The combination of these two things is your expected return. If this return is higher than your cost of capital, then invest in said growth stock! There is also an appendix to Chapter 8 that will only serve to confuse readers. The second part of this appendix or maybe the entire appendix is written by someone who I'd bet has never managed real money.

The authors point this out, but then do nothing about it. The model also does not work for companies that are losing money or have no retained earnings, or for companies that have dramatically varying year-to-year growth rates. A DCF approach, of course, works for all three. The stalwart-type company. But even for this type of company, the results of the model are nonsensical.

Consider a simple example. Imagine that this company has a very long growth runway, and can keep reinvesting pretty much indefinitely. No sane investor would pass on this! The model would have dismissed Copart a decade ago. The model would have dismissed Constellation Software a decade ago. The model would have dismissed Old Dominion Freight Lines a decade ago. Go and take a look at what all of those stocks have done since For example, the authors apply their model to Intel, and the model ends up suggesting that Intel stock offered a better prospective return in March of at Zooming out for a moment, in March of , the internet bubble was in full swing.

Intel was trading at a near-peak valuation of almost 40x earnings. In March of , the internet bubble had popped and Intel was trading at a much more reasonable mid-teens normalized earnings multiple. Yet the authors of a book on value investing, no less!

What actually happened? In the 10 years from March of onward, Intel returned One small addendum on Intel -- even with their own example, the authors could barely make their returns-based model work. But assuming such a high organic growth rate would break the model. This 8. As a final aside, I was also disappointed by the sheer number of errors throughout the book. There are a litany of basic spelling and typographical errors. There are errors in the mathematical formulas in the appendices.

There are errors related to the calendar dates quoted in the Intel example. And then there are other inexplicable inconsistencies that further evidence the fact that the book has five authors working separately. Instead, the other examples always use nominal rates inclusive of inflation. No explanation is given for this inconsistency. Ultimately, I think the first edition of this book was quite good. I think this edition is significantly worse. Feb 01, Liam Polkinghorne rated it liked it.

Provides a good basic overview, useful for those new to value investing. Enjoyed the investor profiles in the second part of the book, especially of Glenn Greenberg of Chieftain Capital. Deep research on a small number of stocks, all four team members have to agree before a stock enters the portfolio. Will look to do more reading on him. Jan 12, Gennady rated it it was amazing Shelves: investing. This review has been hidden because it contains spoilers. To view it, click here.

It is the best book on Value investing I have seen. It is a good review book, which put together all the different concepts together margin of safety, intrinsic value, etc. It also has a satisfactory review of the key value investors, and you can judge for yourself that they might have quite different approaches within the value investing theme.

I did not like that different profiles for different investors not similarly structured. Some investment cases presentation is helpful, but sometimes It is the best book on Value investing I have seen. Some investment cases presentation is helpful, but sometimes dominated too much. Quotes: Most investors want to buy securities whose true worth is not reflected in the current market price of the shares.

There is general agreement that the value of a company is the sum of the cash flows it will produce for investors over the life of the company, discounted back to the present. In many cases, however, this approach depends on estimating cash flows far into the future, well beyond the horizon of even the most prophetic analyst.

Value investors since Graham have always preferred a bird in the hand-cash in the bank or some close equivalent-to the rosiest projection of future riches. Therefore, instead of relying on techniques that must make assumptions about events and conditions far into the future, value investors prefer to estimate the intrinsic value of a company by looking first at the assets and then at the current earnings power of a company.

A further advantage of the value investor's approach-first the assets, then the current earnings power, and finally and rarely the value of the potential growth-is that it gives the most authority to the elements of valuation that are most credible. This pruning has the effect of driving up the price of currently successful stocks and depressing even further stocks that are already downtrodden.

The end of the year has historically been a good month to pick up the value stocks that window-dressing managers have tossed out in order to avoid listing them in the year-end report. A more thorough examination of the correlation of past performance with future return would reveal just the opposite: over a two-or three-year period, yesterday's laggards become tomorrow's leaders.

The traditional Graham and Dodd earnings assumptions are 1 that current earnings, properly adjusted, correspond to sustainable levels of distributable cash flow; and 2 that this earnings level remains constant for the indefinite future. Because the cash flow is assumed to be constant, the growth rate G is zero. The adjustments to earnings, which we discuss in greater detail in Chapter 5, include 1.

Rectifying accounting misrepresentations, such as frequent "onetime" charges that are supposedly unconnected to normal operations; the adjustment consists of finding the average ratio that these charges bear to reported earnings before adjustments, annually, and reducing the current year's reported earnings before adjustment proportionally. Resolving discrepancies between depreciation and amortization, as reported by the accountants, and the actual amount of reinvestment the company needs to make in order to restore a firm's assets at the end of the year to their level at the start of the year; the adjustment adds or subtracts this difference.

Taking into account the current position in the business cycle and other transient effects; the adjustment reduces earnings reported at the peak of the cycle and raises them if the firm is currently in a cyclical trough. Considering other modifications we discuss in Chapter 5. The goal is to arrive at an accurate estimate of the current distributable cash flow of the company by starting with earnings data and refining them.

To repeat, we assume that this level of cash flow can be sustained and that it is not growing. Although the resulting earnings power value is somewhat less reliable than the pure asset-based valuation, it is considerably more certain than a full-blown present value calculation that assumes a rate of growth and a cost of capital many years in the future. And while the equation for EPV looks like other multiple-based valuations we just criticized, it has the advantage of being based entirely on currently available information and is uncontaminated by more uncertain conjectures about the future.

We have ignored here the value of the future growth of earnings. But we are justified in paying no attention to it because in evaluating companies operating on a level playing field, with no competitive advantages or barriers to entry, growth has no value. Element 3: The Value of Growth When does growth contribute to intrinsic value? We have isolated the growth issue for two reasons.

First, this third and last element of value is the most difficult to estimate, especially if we are trying to project it for a long period into the future. There are ways to compare situations that initially look dissimilar. There is almost always a "per" number: price per subscriber, per regional population, per caseload, per stadium seat. Recent sales in the private market provide a benchmark for valuing the license or franchise of the company under analysis.

The competitive advantages that the incumbents enjoy need to be identifiable and structural. Good management is certainly an advantage, but there is nothing built in to the competitive situation to guarantee that one company's superiority on the talent count will endure over time. Structural competitive advantages come in only a few forms: exclusive governmental licenses, consumer demand preferences, a cost supply position based on long-lived patents or other durable superiorities, and the combination of economies of scale thanks to a leading share in the relevant market with consumer preference.

Spotting franchises is a difficult skill-one that takes time and work to master. They will buy growth only at a discount from its estimated value large enough to make up for the greater uncertainty in valuation. The ideal price is zero: Pay in full for the current assets or earnings power and get the growth for free.

Equation for the present value of a growing firm, which is where F is the growth factor. Appendix: Valuation Algebra: Return on Capital, Cost of Capital, and Growth Whenever cash flows increase at a constant rate, it is possible to calculate the present value PV of this stream with the following formula: where R is the cost of capital and G is the rate of growth.

Buying a company for substantially less than tangible book value or the well-tested value of its earnings is already a low-risk strategy. Using a valuation based on assets as a check on a valuation based on earnings power, all the while refusing to pay much if anything for the prospects of growth, further limits risk. If an ordinary portfolio one not selected on value grounds needs 20 or 30 names to be adequately diversified, then perhaps the margin of safety portfolio needs only 10 or Value investors also control risk by continually challenging their own judgments.

Since many of their decisions run against the grain of prevailing Wall Street sentiment, they look for some credible confirmation of their opinions. For example, if knowledgeable insiders are buying the securities even as the market ignores the stock, the investor gains a measure of assurance. Position limits are an additional safeguard. Investors establish policies that limit the amount of the portfolio they will commit to a single security.

They can have one limit for the initial purchase and another standard for securities within the portfolio. If a position appreciates above those limits, it is a signal to trim back by selling into strength. This is certainly a form of diversification, but it is designed more to limit the exposure to any particular investment than to mimic the behavior of the broad market.

The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Though the mathematical calculations required to evaluate equities are not difficult, an analyst-even one who is experienced and intelligent-can easily go wrong in estimating future "coupons.

First, we try to stick to businesses we believe we understand. That means they must be relatively simple and stable in character. If a business is complex or subject to constant change, we're not smart enough to predict future cash flows. Incidentally, that shortcoming doesn't bother us. What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know. An investor needs to do very few things right as long as he or she avoids big mistakes.

Second, and equally important, we insist on a margin of safety in our purchase price. If we calculate the value of a common stock to be only slightly higher than its price, we're not interested in buying. Risk is "the possibility of loss or injury. This is an antidiversification device, and it has a manifold influence on their entire investment process.

First, they need to have two types of confidence in the selection: confidence in their ability to understand the company, its industry, and its business prospects; and confidence in the company, that it will continue to perform well and increase the wealth of its shareholders. Chieftain portfolio has far fewer than the 20 names that a strict 5 percent rule might imply. The partners normally hold 8 to 10 stocks in their accounts, and they are willing to invest heavily in a situation that they are thoroughly convinced will work out for them.

To improve their odds, all four professionals in the firm study the same stocks, and they have to agree before they buy a share. If diversification is a substitute for knowledge, then information and understanding should work in reverse. If it normally holds shares in 10 or even fewer companies, then on average it needs to put hundreds of millions into any one name.

Because great situations are so difficult to find, they are prepared to buy 20 percent or more of any one company. While there are around 1, or more companies large enough for them to own, their "good business" requirement probably shrinks that list by 80 percent, leaving them with no more than possible Chieftain is not attracted to turnaround companies or cyclicals, where a successful investment depends on timing.

He does not believe in speculating that an underperforming company will be taken over, because most managements resist selling out. Before the arrival of the personal computer and the electronic spreadsheet, he and his partner would analyze a company by isolating its business segments and projecting revenue and expenses no more than two or three years into the future. By assuming that it would grow steadily from then on, they could calculate its current value by discounting that cash flow back to the present, using only a hand calculator.

Now, with spreadsheets, they can make their projections more detailed and carry them forward further in time. Discounted cash flow analysis, a method about which we expressed some reservations in the first part of this book, is Greenberg's valuation technique of choice for all the investments he makes.

He is only interested in companies with stable earnings and relatively predictable cash flows. And he is careful to make sure that all of the assumptions that are built into a present value analysis are reasonable and conservative: sales growth rates; profit margins; the market prices of assets such as oil, gas, and other fuels; capital expenditure requirements; and discount rates.

Common sense serves as the touchstone against which all spreadsheet projections are assessed. He uses the model; he doesn't let it control him. The real value of doing all the work required for a full discounted cash flow analysis is that it forces the investor to think long and hard about all the factors that will affect the future of the business, including the risks it may face that are currently unexpected and unforeseen.

With few stocks in their clients' portfolios, each of them purchased as a long-term investment, the partners of Chieftain do not need to find many new companies to add to their list. In some years, they buy no additional names, in other years three or four. This slow turnover leaves them time to keep thoroughly informed about the firms they do own, a necessity given the large stakes they maintain in each of their companies.

All the partners go to the companies' meetings; all of them scrutinize the quarterly filings; and all of them keep current about the industry. They talk with management regularly, and they read the trade journals and other relevant material. In addition to the superior returns we described, their work has earned them the respect of the executives with whom they speak.

They have been told by management that they understand the company better than all sellside analysts covering it. Greenberg readily acknowledges, they make plenty of mistakes and are often quite inexact in their estimates of a company's revenues and earnings. They tend to err on the high side, which puts them in the camp of most analysts. How then have they done so well?

For one thing, as value investors, they have not based their investment decisions on expectations of perfection. They do not buy high multiple stocks for whom an earnings disappointment can mean a punishing drop The companies in their portfolio are sound enough to recover from short-term problems. As a consequence, the mistakes they have made have not buried them. Their poor investments, Greenberg says, have resulted more in dead money than fatal declines.

By establishing the ranges with precision, this approach provides a check on the emotions that can distort investment judgment, both the exuberance engendered by a rising market and the despair occasioned by a falling one. To estimate the intrinsic value of a firm, Price asks one question: How much is a knowledgeable buyer willing to pay for the whole company? He finds his answer by studying the mergers and acquisitions transactions in which companies are bought and sold. It is important to wait for the market to offer a price with a discount large enough to allow for a margin of safety.

It is much easier to understand a security than an economy, and the way to profit is by using that understanding. Their office-Castle Schloss has one room-is spare; they don't visit companies; they rarely speak to management; they don't speak to analysts; and they don't use the Internet.

The Schlosses would rather trust their own analysis and their long-standing commitment to buying cheap stocks. This approach leads them to focus almost exclusively on the published financial statements that public firms must produce each quarter. They start by looking at the balance sheet. Identifying "cheap" means comparing price with value. What generally brings a stock to the Schlosses' attention is that the price has fallen.

They scrutinize the new lows list to find stocks that have come down in price. When they find a cheap stock, they may start to buy even before they have completed their research. Schlosses believe that the only way really to know a security is to own it, so they sometimes stake out their initial position and then send for the financial statements. The market today moves so fast that they are almost forced to act quickly. Feb 22, Joe Cosentino rated it liked it.

I read this book because I'm currently enrolled in Greenwald's Value Investing course and wanted to dig a bit deeper. This book is very good for anyone interested in the basic precepts of value investing basically, looking for good companies that are currently out of favor with the stock market. Bruce gives a good summary of the traditional value approach as devised by Benjamin Graham and David Dodd, and also profiles a handful of more contemporary value investors Warren Buffett, Mario Gabell I read this book because I'm currently enrolled in Greenwald's Value Investing course and wanted to dig a bit deeper.

Bruce gives a good summary of the traditional value approach as devised by Benjamin Graham and David Dodd, and also profiles a handful of more contemporary value investors Warren Buffett, Mario Gabelli, etc. It was interesting to read about the various practical approaches to value investing to get beyond just theory. I may have preferred more if I was newer to the material. There are some really good case studies, and he clearly articulates concepts like Warren Buffett's "franchise businesses" and Mario Gabelli's idea of a "Private Market Value" using businesses like WD you have a can in your home and you may not even know it.

This book is good for anyone who wants a methodical framework for assessing the value of equity securities. A word of caution, however, the behavioral tantrums of "Mr. Market" make value investing much harder in practice! Oct 07, Mahadevan Sreenivasan rated it it was amazing. This book has been an eye opener to me.

Tools like DCF suffer from a major problem - the need to predict future earnings which is difficult to predict even for the company stakeholders. Greenwald's method looks at what it takes to value a company if it wants to sustain without any growth. Chapters 4 - 7 This book has been an eye opener to me. Chapters 4 - 7 are a must read for any budding investor. It starts out with the most defensive method of investing which tries to value the reproduction cost of assets in the balance sheet.

Finally one can try to apply a growth factor if one finds that the company truly has a moat and is in a growth phase.

Value investing from graham to buffett and beyond ebook library bist 1oo

Value Investing From Graham To Buffett And Beyond (Part-1)

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