Valuegrowth Investing

Rating:
Summary: Helpful guide to fundamental analysis, but...
Review: In order to make money in stocks, you need to know how Wall Street works.

There are 2 schools of thought: technical analysis--the study of market action (price and volume), and fundamental analysis--the attempt to determine of the "intrinsic value" of a security (stock, bond, etc). This book is devoted to the various methods of fundamental analysis for stocks, which is the major approach to security selection on Wall Street.

The crucial point that you won't find in most books--there is no distinction between growth and value investing. Any intelligent investor wants to buy a business that has good (not necessarily great) growth prospects, but shouldn't be willing to pay any absurd price for it. An intelligent investor wants either value or growth at reasonable prices. Keeping this in mind may have helped you avoid many internet stocks when they were trading at absurd levels.

I thought the author did a very good job illustrating the techniques of various successful fundamentalists. Of course, it would take practice and further study to implement these methods.
I'd recommend Fundamental Analysis by Ritche, and Financial Scheninagins, by Schlitt, to complement your study in fundamental analysis.

If the book stuck simply to describing fundamental analysis, I'd give it 5 stars. But it doesn't.

The author seems to show a total distain for technical analysis.
This bashing of an alternative method of market analysis decreases the educational content of the book.

The value of a company isn't SOLELY determined by fundamentals, but by investor PERCEPTION of those fundamentals, in addition to other factors. Much info can be learned about investor perceptions regarding a stock by looking at price action, volume, and indicators. But it takes practice to interpret it.

Often, price will decline BEFORE important fundamentals are released to the market. Anyone reading an Enron chart would have saved a significant amount of cash by selling BEFORE the fundamentals were released.
A successful trader needs to a) understand the market's perception of a stock b) understand how changes in the fundamentals will change investor perceptions c) decide whether to follow the crowd (follow the trend), or take the other side (fade the trend).

Read the book for its good explanation of fundamental analysis. Take the trash talk about technicians with a grain of salt. Both approaches can make money, and an intelligent investor will find knowledge about both essential.

Rating:
Summary: Big Hat, No Cattle
Review: This book talks a good game about showing a new, long term way of investing. Unfortunately, no real action - just talk.

The book does a decent overview of different schools of thought on investing from some leading do-ers - Lynch, Buffet, Graham, etc. However, the book spends its pages on this "overview" and fails to get at the "what to do to acheive" the Valuegrowth promises. I found this book to talk a lot about a new way to view the world of investing, but virtually silent on how you do it. No one would disagree with selecting companies with good management or strong product pipelines, but the path an individual investor can take to answer these questions was strangely absent.

If you want a book that reads like a college essay on "comparing and contrasting" the views of Lynch, Buffet, etc. this would be fine. You won't see a path to improved investing results, but you will get an overview.

If you are interested in "how" to achieve improved investment results, this book will do nothing to help - although that sure is the implication from its PR. Save your money and your time.

Rating:
Summary: Excellent Summary of Great Investors
Review: This is a great guide to investing, in my opinion. The author compiles profiles of the great practitioners of investing and distills their philosophies. Warren Buffett, Charlie Munger, Peter Lynch, John Neff, Benjamin Graham, and Philip Fisher are the thinkers he's tapped for his book, and he captures the essence very well.

Of course the author can't give you and exact how-to of investing. Much of it is business sense that can't be taught. However, with this as a guide, any person with business sense can succeed.

Also, one reviewer's comment that "the value of a company isn't SOLELY determined by fundamentals, but by investor PERCEPTION of those fundamentals, in addition to other factors" is completely wrong. Obviously you haven't been paying attention to the lessons of the great investors. A business has an intrinsic value regardless of market price. Market price is merely a vote of the value, not the value itself.

Be sure to read Chapter 8, "The Valuegrowth Investor," and Chapter 9, "The Analysis of Industries."

A copy of his "Key Principles of Buffett's and Munger's Approach" (pg 228) is going right above my desk.