Strategic Value Investing: Practical Techniques of Leading Value Investors

The authors have trained more professional investment analysts across the world than anyone else on the planet, so when they write something that is accessible to individual investors, it's certainly worth considering. It's written at a level that addresses a big gap between how-to-invest magazine articles and graduate finance texts. I was also struck by how helpful it could have been to read this before starting on the Chartered Financial Analyst program, because it offers a cognitive framework that would have come in handy when it's time to dive deep into the CFA material. I also hope any retail financial advisor that has ever said the word "undervalued" to a client knows the concepts covered here, too.Luckily, the material is written in a conversational style that is both intelligent and engaging at the same time. It covers important concepts in an appropriate level of detail along with good context and some thoughtful anecdotes. I've read a lot of finance texts over the years, and this is one I can easily recommend to others.

This book is a good reference on stock valuation models. I've dipped into several chapters, which tend to be on the academic / theoretical side. The moral of the book is that value investing works well in the long run. It has great discussion of the various valuation metrics. I intend to study this book more carefully when I finish reading the complementary book, What Works on Wall Street.

Strategic Value Investing is written in three sections. The first section discusses the background of value investing, the second discusses a variety of ways to value securities, and the third discusses formulating a strategy for assembling a portfolio of quality value securities. Having read The Intelligent Investor and Security Analysis, I found the second and third sections of this book the most helpful.The book is very clearly written, in plain English.This will be a great addition to any investor's library.

I like this excellent book that summarizes many investing techniques. I wish the authors devoted more pages to RIM and AEG models (Residual Income model and Abnormal Earnings Growth). Author does touch a lot on RIM model and has some reservations because it uses accounting numbers that is suspect. DDM -Dividend Discount model that has been touted by many academics (finance folks, not accounting folks) is completely outdated (Columbia Business School Professor Stephen Penman says so, I agree with him). The author tries to bring everything together in the end using examples from various third party screening tools (Guru Foucs, AAII SI Pro). In fact, author has a fabulous article on this very topic in AAII Journal. That article in AAII lays-out the framework in more detail that the book itself! In the end book ran out of gas. It connects the dots but in a hurried manner. I feel the application part this strategy is dealt in limited fashion, but could have been lot more exhaustive with lots of examples. Author has no backtest results of the strategies that is mentioned in the book (at least they could point to the write journal articles that show cash-flow yield works better than some other strategy etc.). This backtest will add value to their claim and also gives the investor more confidence (IMHO). Author also talks about "valuetrap" for value stocks. This is an excellent topic that needs to be addressed in more detail so that individual investor can benefit. My 2 cents on this topic is as follows:For example: BGFV showed as value stock in Briefing.com's service sometime back. Actually it was a value trap based on SSS, value and working capital issues. AVD was touted as a growth stock recently by AAII stock-superstars service. It turned out to be a a big trap. A simple working capital analysis showed this and I bailed (hit the exit with 4% loss). Now COH is showing up as great value stock in Joel Greenblatt's magic screen. As I write this (June 5, 2014), it is another valuetrap, because the intrinsic value is close to $31 (according my analysis). More recently DAL (Delta Airlines) is touted as value stock (for some maybe growth stock, altough there is nothing like a value or growth stock according to Warren Buffett), but it is another valuetrap IMHO. Intrinsic value is $37 ($30 from forward earnings, $4 from 5 yrs of earnings and $3 from continuing value). Here I assume generous 10% earnings growth beyond 2 yrs and 10% cost of capital.All these has taught me a big-lesson. Never trust the results of some stock screen blindly (or somebody who gives this screen, or sells a screen to you). Even if the stock idea comes from some famous person, flavor of the year or decade or academic who has done rigorous back testing etc.IMHO author could have shown their backtest results (using COMPUSTAT data analysis) to make a case. Irrespective of this, do your "intrinsic" value analysis. Shun DDM model (old technology), use RIM or AEG or FCFE model. In fact the very same authors have another article in AAII that explains which valuation method to use under various circumstances. It is a good one.If one does DDM method to value BA (Boeing) that authors do in AAII article its value is $71. A value investor of course would never buy at $71 or more. I think intrinsic value based on AEG or RIM (both are same according to accounting experts and can be shown using a equation), BA value is close to $130. Let me also make it clear that DDM uses a lot of assumptions about future, and FCFE uses even more assumptions on future. In fact FCFE numbers start with with sales grwoth and operating margin, tax rate etc. and this is no different in estimating ROE or EPS numbers for RIM and AEG models. So somehow this notion that RIM and AEG models are difficult is not correct (IMHO).Take another example such as PCLN Priceline -one can never value PCLN using DDM. RIM works well and also AEG models work superbly, same with GOOG. Would you buy google (GOOD) in 2004 thinking that PE is so high? NO. Value investor would not touch unless he can value the intrinsic worth. Starbucks in late 1990s, Home Depot, GE, Apple (AAPL) in mid 2000's had negative Free Cash Flow and if one used FCFE model, they would never buy such companies. A growing company uses lot of working capital and cash flow is negative. And if you "value" these companies using FCFE model, terminal value gives your about 70 to 80% of value (utterly unreliable long term forecast). Pick the right tool for the right job (right valuation model for the right company) is the message.Overall I liked the book (cannot complain for $20). An excellent addition to your investing library.

Very useful book for INVESTORS and not traders. How to evaluate companies and buy stock in them as an owner of the company for the long haul and not going after the quick speculation. Basically how to get rich slowly and minimize your risk.

In the same vein as many other equity value-investing books. Definitely worth a read.4 stars because the editing is poor. The book is replete with errors, incorrect tables and incorrect references. Unfortunate for a book that would have otherwise received a 5 star. Hopefully a second edition will fix these.

Very good book thal I would recommend to anybody interested in stock investing. A lot of very practical an useful information presented in a very well organized way. Well worth the prize paid.

Nice read. A bit like most value investing books out there already but worth reading for sure.

This is the best book I have ever read in investing ! everything is crystal clear and goes into extensive detail! literally taking Walmart’s earnings and analyszing every piece of data from the income to cashflow statement I really enjoyed it. More books should go into detail like this book

Das Buch ist echt gut, konkret, direkt und praxisorientiert.Natürlich bleibt die Bibel das Buch von Benjamin Graham, aber mal auch ein "how to" in der Hand zu haben ist sehr hilfreich.

Le "value investing" est une technique d'investissement en bourse très connue des américains dont les papes sont Benjamin Graham et Warren Buffet.Quelles sont les promesses de livre ?Ce livre prétend révéler tout ce qu'il est nécessaire de connaitre pour bâtir un portefeuille boursier de classe mondiale en utilisant le "value investing" comme point central. Ecrit par des experts de cette technique et de l'analyse financière, ce guide facilement accessible explique tout en détail avec une démarche aisément reproductible.Que contient ce livre ?En un peu plus de 300 pages, les auteurs expliquent ce qu'est le "value investing" et pourquoi cette approche est gagnante. Puis on détaille les pièges à éviter en utilisant cette technique. On peut alors entrer dans le coeur de l'ouvrage avec la sélection des entreprises (analyse économique, analyse industrielle, analyse de l'entreprise). S'ensuivent alors 6 modèles permettant d'évaluer réellement la valeur boursière d'une entreprise. Enfin les auteurs expliquent quel modèle choisir en fonction des entreprises étudiées.Pour avoir lu d'autres ouvrages relatifs au "value investing", il apparaît que ce livre n'est pas le plus adapté au grand public. Les notions abordées sont relativement complexes et difficilement applicables au quotidien. L'approche est très théorique avec des formules qui raviront davantage les étudiants en comptabilité et en analyse financière. Ce n'est en aucun cas un livre pratique duquel vous sortirez des recettes directement applicables pour sélectionner vos valeurs boursières. Il existe d'autres ouvrages bien plus accessibles et appliqués qui éviteront la frustration à un lecteur cherchant à dynamiser son portefeuille boursier.

I have read many books on investing in general and value investing in particular. I am also a value investing practitioner. This is the branch of investing I practice as a private investor in Indian stock market. I would rate this book very high. The book is very well written. The concepts are explained clearly. It is not unwieldy. But still covers lot of ground. It won't be an exaggeration if I say that if you read this book carefully and practice the concepts on many real companies/stocks you will become skilled practitioner. I am not saying successful because that depends on behavioral attributes as much as technical expertise in evaluating and valuing companies. After reading this book you will know how to do security analysis like equity analysts in Wall Street. The book describes financial statement analysis, industry analysis, 3 types of valuation methods and also goes into little bit of earning quality/fraud investigation. The authors are associated with CFA institute so the content and advice are trustworthy. Overall great package and good value for money. The hard cover book is pleasure to hold. I think every investor should have this book on his/her book shelf.

Loved the probability and statistic part of that book. Never read about that aspect of investing. Very concrete : more than most investment books.