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Value Investing: From Graham to Buffett and Beyond Paperback – Jan 26 2004


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Value Investing: From Graham to Buffett and Beyond + The Intelligent Investor: The Definitive Book on Value Investing + Common Stocks and Uncommon Profits and Other Writings
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Product Details

  • Paperback: 320 pages
  • Publisher: Wiley; 1 edition (Jan. 26 2004)
  • Language: English
  • ISBN-10: 0471463396
  • ISBN-13: 978-0471463399
  • Product Dimensions: 15.2 x 2.2 x 22.9 cm
  • Shipping Weight: 558 g
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: #30,581 in Books (See Top 100 in Books)
  • See Complete Table of Contents

Product Description

From the Back Cover

"This book deserves a place on every serious investor’sshelf."
–FINANCIAL TIMES

"A must-read for all disciples of value investing. In 1934,Graham and Dodd created fundamental security analysis. Greenwaldreinforces the worth of this approach, incorporates new advances,and takes their work into the twenty-first century."
–Mario J. Gabelli, Chairman, Gabelli Asset Management,Inc.

"The new title most deserving of your time is Value Investing .. . . Its authors aim to place their work next to BenjaminGraham’s 1950 classic, The Intelligent Investor. My 1986edition came with Warren Buffett’s endorsement–‘byfar the best book on investing ever written.’ Value Investingis better."
–Robert Barker, BusinessWeek

"Greenwald is an economist (PhD from MIT) who caught the valuebug. He has updated and expanded Graham’s ideas, and hissummer seminars ($2,900 for two days) have become popular witheveryone from well-known money managers to Columbia MBAs whocouldn’t get into Greenwald’s class. But now there is acheaper way . . . Greenwald probably won’t outsell Graham, butI think he ought to."
–Paul Sturm, SmartMoney magazine

"Greenwald’s book is a lively defense of, and handbook for,value investing, complete with glimpses of how it’s practicedby pros like Warren Buffett and Mario Gabelli."
–George Mannes, TheStreet.com

"Essential reading for anyone looking for a fresh perspective onanalyzing companies and selecting investments."
–Pat Dorsey, Morningstar.com

About the Author

BRUCE C. N. GREENWALD is the Robert Heilbrunn Professor ofFinance and Asset Management at Columbia University Graduate Schoolof Business.

JUDD KAHN has taught history, served in city government,and worked as a securities analyst, a CFO, and a managementconsultant. He has a PhD in history from the University ofCalifornia, Berkeley.

PAUL D. SONKIN is the investment manager of theHummingbird Value Fund. He has worked at the SEC, Goldman Sachs,Royce Funds, and First Manhattan Company. He holds an MBA fromColumbia.

MICHAEL van BIEMA is a member of the finance faculty ofColumbia Business School. Prior to joining the faculty of Columbia,he was a principal at the RONIN Corporation, a managementconsulting firm, and the cofounder of several technology companies.He has a PhD from Columbia in computer science.


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Most helpful customer reviews

Format: Paperback
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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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: 46 reviews
58 of 59 people found the following review helpful
Must-read for serious investors of any stripe Aug. 12 2006
By Paige Turner - Published on Amazon.com
Format: Paperback Verified Purchase
A must-read for investors of any stripe, growth or value. This book, written by a couple of the most popular professors at Columbia Business School, explains the innovations in the field of value investing as practiced by some of the most successful investors in the field. (fair disclosure: I took Prof. Greenwald's courses in 2007) This book successfully bridges the gap between the traditional Graham & Dodd style of value investing to what works today. Although it's a paperback, it's written with the density of a textbook. The writing style is not light, and the actual meat of the book takes some time to wade through. If you don't have some experience in accounting or corporate finance, then Joel Greenblatt's The Little Book That Beats the Market is good to read first.

The substance of this book is a process for modern value investing: value investing is not investing in lousy companies just because they appear cheap. The authors also teach a structured way to value a company. Finally, the authors address how to value growth.

First, before reading this book I had the mistaken impression that value investing was all about investing in the ugliest, least interesting company you could find just because it had a low P/E ratio. I was completely wrong! (Maybe I have attended too many stock pitch sessions and heard too many poultry stocks and encyclopedia companies get pitched.) Modern value investing, according the authors: "When B. Graham went scouring financial statements looking for his net-nets, it did not concern him that he may have known little about the industry in which he found his targets. All he was concerned with were asset values and a margin of safety by that measure. A contemporary value investor had better be able to identify and understand the sources of a company's franchise and the nature of its competitive advantages. Otherwise he or she is just another punter, taking a flier rather than making an investment." What a breath of fresh air to read this passage.

Second, this book lays out a structured way to value a company by first looking at reproduction costs of assets, then earnings power, and finally the value of profitable growth. I, like the authors, find traditional DCF valuations to be plagued by false precision. The authors' more practical method starts by adjusting the balance GAAP balance sheet to calculate the cost of the assets for a potential business entrant. Next, the company is valued based on the earnings generates consistently, assuming no growth. A key insight is the value of the franchise: the difference between asset value and Earnings Power Value is the value created by a company that has significant competitive advantage. Last, the value of profitable growth is considered.

As a self-admitted recovering growth stock addict, I learned from this book that value investors are skeptical about growth for two reasons. One reason is that it is so hard to predict, but more important, many times growth is not worth much. Unless the return on capital (ROC) of the company is higher than the cost of capital, growth does not create value. (I am a slow learner; Greenblatt's example in The Little Book That Beats the Market of opening an additional gum store is even clearer to me.) The growth matrix and formulas in the book were a revelation to me. The surprising thing is how little multiple expansion a stock deserves based on growth. Unless a company truly has a franchise, expanding into other areas and "diversifying" the business often destroys value. And growth for growth's sake will not make a stock go up.

This book brings value investing into the modern stock market. Modern value investors still use traditional valuation principles in a structured way, but they also consider the value of growth and the attractiveness of the business. What a relief, I not restricted to buying typewriter and pay phone stocks! The authors quote Warren Buffett: It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
63 of 67 people found the following review helpful
Good content, but confusing Aug. 19 2005
By A Simple Guy - Published on Amazon.com
Format: Paperback Verified Purchase
Good content and good approach. I'm a fan of value investing. The book teaches the reproduction cost of assets and the earning power value. It also hints on how to incorporate growth.

The problem is that information is all scattered around and the wording is not very reliable. The authors mix capital with ROIC with ROE. They also don't make it clear when they mean cost of capital or WACC. Also, the definitions are not there and that creates confusion.

I found a few typos in tables. The values are carried from one table to another and sometimes are rounded sometimes are not. Some entries in the tables just don't mean anything because the values are never used nor referred to. That's a very bad practice for authors coming from academia. They should know better.

The book would improve to a 5-star rating had them fixed all typos, explained all terms, and put all calculations in tables in math formulas instead of just saying something along the lines of "we multiply the WACC by the ROIC and divide by the tax rate and we get a P/E of 10.5". (Example exagerated). Suggestion: List all the steps so we can follow. Add text to explain whats being done. Refer to rows and columns in the table so we know what values came from where. Also, clearly differentiate between tables with original facts (e.g., balance sheet from annual report) from tables that contain either speculation or derived numbers. Anything discounted or adjusted is speculation or derived.
11 of 11 people found the following review helpful
Must-read for value investors! July 1 2007
By Davy Bui - Published on Amazon.com
Format: Paperback
What I Liked About It
* Details several valuation methods that I haven't seen in other non-academic, mainstream investing books.
* Several real-world examples to apply valuation methods
* Great treatment of brands vs. franchises

What Needed Work
* Various investor profiles unnecessarily fill the 2nd half of the book.
* Attempts at quantifying "franchise" felt a bit forced.

Greenwald's book ranks at the very top of my investing bookshelf. I read this after having read Graham, Greenblatt, Klarman, Lynch, P. Fisher, Cramer (yes, that Cramer!), Dorsey, Buffett, and Browne among others. Amazingly, this book broached a number of topics not covered by those prominent authors. As such, this book is required reading for the discerning investor.

The most important concepts this book gave me were valuation methods based on net asset value (NAV) and earnings power value (EPV). Before this, I had trouble valuing companies that didn't generate steady cash flow or have commodity assets. Now I have more angles from which to examine a prospect and find undervalued companies besides running a DCF analysis. We've heard about past opportunities where you could have bought a company like McDonalds for the price of its real estate and gotten the business for free. Greenwald shows you how to find these opportunities using his asset valuation methods. He also gives you the tools to fairly value "tech" companies (or any enterprise with heavy intangible capital). Less convincing is his discussion of earnings power value but nonetheless, it's still helpful to be able to examine a company's earnings ability.

Greenwald also spends time discussing problems with discount cash flow analysis (DCF) as well as franchises. While his thoughts on these subjects were thought-provoking, I don't completely agree with his conclusions.

On DCF, Greenwald says that trying to project future growth rates 5-10 years forward is folly and will distort your DCF analysis. While he is right that future growth projections are problematic, that doesn't mean DCF isn't helpful for individual investors. Greenwald concedes that his preferred methodologies require, in some instances, in-depth knowledge of the business and industry of the company being examined. The non-professional (me!) may not have this expertise and any estimates of asset worth or capital costs would be just as faulty as analyst growth estimates. In fact, an adjusted future growth rate derived from a number of industry-knowledgeable analysts may be more generally accurate (if imprecise).

The main knock against the book is the whole second half consisting of eight investor profiles. There's nothing wrong with them per se except that they are in the book at all. If I had wanted a book on famous value investors, I would have picked up something by Kirk Kazanjian. The chapter on Warren Buffett is almost exclusively quotations taken from freely available public reports and Seth Klarman has written his own book on investing.

I've written a more-indepth review at my enlightened-american website but in summary, my advice is to soak in the 1st half of the book and skip the 2nd half entirely. Dig into an annual report instead and start applying what Greenwald's shown you.
12 of 12 people found the following review helpful
the most comprehensive review on value Sept. 19 2006
By Antonios Wisa - Published on Amazon.com
Format: Paperback
In short, this book is grounded on economics and common sense. It summarizes "the intelligent investor", "security analysis", and the modern books on Buffett pretty well (there are other paths to heaven besides Buffett's). Its verbiage is beautifully chosen and a joy to read, especially for avid value investors. Best of all it is a scholarly work - if you're sick and tired of the commercial investing books that flood bookstores, buy this book.
5 of 5 people found the following review helpful
The best book on investing I have ever read March 2 2009
By Houman Tamaddon - Published on Amazon.com
Format: Paperback
I had been waiting for an outstanding book like this one for years. I finally found it! The book is divided into two main parts. The first part describes value investing and lays out the foundations on how to go about valuing investments with an emphasis on companies' stocks. The second part describes the approaches of some value investors with the greatest number of pages dedicated to Warren Buffett.

Greenwald et al lay out the principles of value investing in a manner that is basic enough that any intermediate investor can easily follow and yet, unlike many other books, not so basic that is becomes meaningless or insults the readers. There is some basic algebra but nothing too complicated. As Warren Buffett says you do not need to understand complicated math to be a great investor.

The authors also do a great job in explaining why pursuing growth is not a contradiction for value investors. Pursuit of growth strategy may seem at odds with traditional value investing as taught by Ben Graham, but the authors explain the evolution of the discipline clearly. Many criticize value investors as not being really value-oriented when they pursue growth. Value investing can describe different strategies. Two cooks may specialize in Chinese food but can come up with completely different dishes. This does not mean that one of them is not really cooking Chinese dishes. Similarly there is nothing contradictory about a value investor purchasing a growth stock. I thought the authors did a great job explaining this concept to readers. The second part of this book describes nicely how different cooks specializing in Chinese dishes can cook in significantly different manners.

This is an outstanding book and the authors have done their readers a huge service. Ben Graham's Security Analysis and Intelligent Investor are the bibles for many value investors, but this contemporary book is both more enjoyable and readable. I highly recommend it.


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