Value Investing: From Graham to Buffett and Beyond [Paperback]

 

 

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The back cover of this book modestly proclaims that Mr. Greenwald is the "guru of Wall Street's gurus". I don't know what kind of gurus there are on Wall Street but if Mr. Greenwald is their mentor then I really feel sorry for them.
The very next day after I finished reading 'Value Investing' I attended a presentation, sponsored by NYSSA's Private Wealth Management Committee, where the author (editor?) presented the book. The presentation confirmed my first impressions: Not only is Mr. Greenwald confused about what Value Investing is but he doesn't seem to understand some fundamental concepts in Finance. For example, he claims that Compaq's major problem stems from the fact that the company put Alta Vista at market value on the balance sheet and then they had to write it off. Hasn't Mr. Greenwald heard about sunk costs? Investing in Alta Vista may have been a poor decision that destroyed shareholders' value but it is something that pertains to the past. It is not something that will continue to influence the firm's operating results in the future.
Greenwald claims that using asset valuation based on reproduction costs provides more accurate estimate of what the company might be worth then using NPV. According to him, NPV is too difficult to estimate and therefore is almost useless. I agree that NPV is difficult to estimate but if it was easy then everyone could be rich, right? In order to do better an individual investor must have a competitive advantage. Competitive advantage is something that one can do but the competition cannot. If balance sheet reading is easier than future cash flow forecasting then more investors should be able to do the former rather than the later. But if many people can do it then it does not give any competitive advantage. Those lucky few who have the exceptional ability to forecast future cash flows will have the competitive advantage and they will be the ones who will make billions of dollars. If Warren Buffet could not do something that is difficult for others then he wouldn't be so rich. The fact that NPV is difficult to estimate does not make it useless. On contrary, the difficulty makes it even more valuable because it gives competitive advantage to those who have the rare gift to see farther than the average individual.
The author claims that markets are not efficient but his idea of market inefficiency is very peculiar. According to him, for example, there cannot be any value in K-Mart because if there were any value in that stock then the horde of analyst, who follow the company, would have discovered it by now. I am not familiar with K-Mart but the statement he made sounds familiar to what the proponents of Efficient Market Hypothesis keep telling: markets are efficient because thousands of bright analysts are working day and night to uncover hidden value. If one can't find value because analysts have already dug out everything there is to know then what makes markets inefficient? Selling stocks to buy Christmas gifts? This can hardly be enough.
The authors do make some good points but overall the book is bad.

I have read numerous books on the topic of investing, including Security Analysis, The Intelligent Investor, Common Stocks and Uncommon Profits, One Up on Wall Street, Beat the Street, The Warren Buffett Way, and more. But this book is the most detailed and usefully instructive that I have found - at least since The Intelligent Investor. If you have an interest in accurately modeling the investment philosophies of the most successful investors, you will find this book to be invaluable.

This is the best book I've read on value investing. Great insights, practical aproach, detailed and comprehensive, but user friendly.

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5.0 out of 5 stars Packed With Knowledge!
This is a very lucid, practical introduction to the principles of value investing. It is detached, relatively objective considering the authors' bias in favor of the subject,... Read more

Published on Jun 7 2004 by Rolf Dobelli

2.0 out of 5 stars Turkey and Where is the Beef?
There is simply not enough value in this book to justify using it. I'm sorry but words like Alta Vista and Cisco just should not appear anywhere in a value investing book... Read more

Published on Dec 29 2003 by James H. McDuffie

4.0 out of 5 stars Good book about value investing
The values are out there, it is just a matter of finding them and knowing what to look for. This book has many ideas about how to find the values. Read more

Published on Oct 30 2003

5.0 out of 5 stars Packed with Knowledge!
This is a very lucid, practical introduction to the principles of value investing. It is detached, relatively objective considering the authors' bias in favor of the subject,... Read more

Published on Oct 15 2003 by Rolf Dobelli

5.0 out of 5 stars Serves as Both a Great Primer & Also a Great Idea Generator
Ben Graham may have done for investing what Euclid did for geometry, but the Graham student must take a long and winding road to collect and organize Grahamian "theorems. Read more

Published on Mar 3 2002 by S. Schneider

5.0 out of 5 stars Value Investing in the 21st Century
I am a professional investor (CFA charter holder and portfolio manager) and would suggest this book for anyone interested in the value style of investing. Read more

Published on Jan 8 2002 by Anthony J. Abbate

4.0 out of 5 stars Worthwhile, Quick Read
This book was a worthwhile and quick read. The author did a better job than other authors in relating the value approach to the theory of the firm, probability analysis, and... Read more

Published on Dec 9 2001 by Christopher Gable

4.0 out of 5 stars Successful, Long-Term Paths to Outperforming the Averages!
Value investing is so unpopular now, that many do not know about this highly successful form of investing as practiced by its greatest masters. Read more

Published on Oct 30 2001 by Donald Mitchell

2.0 out of 5 stars Good Try
Not a bad stab at the basics, but the debt owed to others is immense. One third of the book consists of excerpts from Warren Buffett's Essays, disorganized, and better read in... Read more

Published on Oct 27 2001

5.0 out of 5 stars Value Investing: From Graham to Buffett and Beyond
This is a required read for any practicing or prospective value investor. I have read most of the books on value investing and found this one to be both insightful as well as... Read more

Published on Aug 23 2001 by Michael Shearn

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