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The Little Book of Value Investing
A concise and masterful discussion of a proven investing strategy There are many ways to make money in today’s market, but the one strategy that has truly proven itself over the years is value investing. Now, with The Little Book of Value Investing , Christopher Browne shows you how to use this wealth-building strategy to successfully buy bargain stocks around the world. You’ll explore how to value securities and find bargains in the stock market. You’ll also learn to ignore irrelevant noise, “advice” from self-proclaimed gurus, and other obstacles that can throw you off your game. T he Little Book of Value Investing also Perfect for beginning retail investors of all stripes, The Little Book of Value Investing will also earn a place in the libraries of veteran investors and portfolio managers seeking an expert reference covering the most time-tested lessons of value investing.
208 pages, Hardcover
First published September 22, 2006
About the author
Christopher H. Browne
7 books22 followersChristopher H. Browne was a famous value investor. He started his career at the firm Tweedy, Browne, a favourite brokerage firm among prominent value investors like Benjamin Graham and Warren Buffett. His success as an investor and shareholder, who held business management accountable, was renowned. For example, since their inception in 1993, both Tweedy, Browne's Value and Global Value Funds have outperformed market averages.
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Displaying 1 - 30 of 148 reviews
July 11, 2013
The heart of this book is chapters 12-14. Chapter 12 is titled "Give the Company a Physical" and shows you how to examine the balance sheet. The important ratios here are:
1. The current ratio - Current assets over Current liabilities - look for a figure greater than 2
2. The quick ratio - same thing minus the inventory
3. Shareholder equity (book value)- Total assets (less intangibles) minus total liabilities
4. Debt to equity ratio - Total debt over Shareholders equity - look for numbers < 1 - the lower the number the better
Chapter 13 is titled "Physical Exam Part II" and examines the income statement.
1. Look for growing revenues ( sales)- top line
2. Gross Profit - Sales minus COGS
3. Gross profit margin - Gross profit over Revenue - look for stability
4. EPS - net profit divided by shares outstanding
5. ROC - Earnings divided by beginning of the year's capital (stockholder's equity plus debt)
6. A low P/E relative to industry and market
Chapter 14 is titled Send Your Stocks to the Mayo Clinic. Her he gives you 16 additional questions to ask about your company. You have to get the book to see the questions.
This book gave me the idea to create a spread sheet with info that I gathered from the book. The following is the one I did on Intel.
INTEL
Shares Outstanding 4,980
Price per share 24.26
Market Capitalization $120,815
Earnings per share 2.0
TOTAL ASSETS 83083
NET WORTH ( SHAREHOLDERS EQUITY) 51,194
Intangibles 15563
Total Liabilities 31889
Book Value per Share $7.15
Price to Book value per share ratio Selling for 3 times the amount company can be sold for
Price to Earnings per share ratio Selling for 12.1 times earnings
Current Assets 28677
Total Current Liabilities 11798
Net Current Assets (Graham's number) $16,879
Net Current Assets per share $3.39
Price to net current assets per share ratio Selling for 7.2 times net current assets
Total Assets 83083
Total Debts 31889
Assets to Debt ratio 2.6
1. The current ratio - Current assets over Current liabilities - look for a figure greater than 2
2. The quick ratio - same thing minus the inventory
3. Shareholder equity (book value)- Total assets (less intangibles) minus total liabilities
4. Debt to equity ratio - Total debt over Shareholders equity - look for numbers < 1 - the lower the number the better
Chapter 13 is titled "Physical Exam Part II" and examines the income statement.
1. Look for growing revenues ( sales)- top line
2. Gross Profit - Sales minus COGS
3. Gross profit margin - Gross profit over Revenue - look for stability
4. EPS - net profit divided by shares outstanding
5. ROC - Earnings divided by beginning of the year's capital (stockholder's equity plus debt)
6. A low P/E relative to industry and market
Chapter 14 is titled Send Your Stocks to the Mayo Clinic. Her he gives you 16 additional questions to ask about your company. You have to get the book to see the questions.
This book gave me the idea to create a spread sheet with info that I gathered from the book. The following is the one I did on Intel.
INTEL
Shares Outstanding 4,980
Price per share 24.26
Market Capitalization $120,815
Earnings per share 2.0
TOTAL ASSETS 83083
NET WORTH ( SHAREHOLDERS EQUITY) 51,194
Intangibles 15563
Total Liabilities 31889
Book Value per Share $7.15
Price to Book value per share ratio Selling for 3 times the amount company can be sold for
Price to Earnings per share ratio Selling for 12.1 times earnings
Current Assets 28677
Total Current Liabilities 11798
Net Current Assets (Graham's number) $16,879
Net Current Assets per share $3.39
Price to net current assets per share ratio Selling for 7.2 times net current assets
Total Assets 83083
Total Debts 31889
Assets to Debt ratio 2.6
December 23, 2015
Like it's Title, its a very small book about Value Investing. A summary of value investing. Dwells a little bit about screening the stocks and reading PL statement. Pretty concise. I would recommend this book to someone who is familiar with Value Investing and it's concepts and is looking for a framework. This book gives you a rough framework which you can build on if you are seriously planning to invest.
October 11, 2017
Value investors are more like farmers. They plant seeds and wait for the crops to grow. If the corn is a little late in starting because of cold weather, they don't tear up the fields and plant something else. No, they just sit back and wait patiently for the corn to pop out of the ground, confident that it will eventually sprout.
Very good book and very easy read, I recommend this one with the great book from Barry Schwartz The Paradox of Choice.
Very good book and very easy read, I recommend this one with the great book from Barry Schwartz The Paradox of Choice.
April 5, 2021
A short book that serves as nothing more than an intro into value investing. It presents the basic priciples and tries to convince you that value investing is the way to go if you're looking to grow your wealth. It offers little depth though. Even the chapters called "Give the Company a Physical" are very superficial and might be useful only for absolute laypeople.
June 26, 2021
I've started to learn about value investing and so far, this is the best one.
Every investor want to pick the 'next-great-stock' and want to be like Warren Buffet but very few (maybe 1%) of the investors actually generate huge wealth. It's not because of lack of intelligence. As said in the book. "The lack of temperament is the main issue for an investor to be wealthy".
"To be wealthy, you don't need an excellent IQ. An average IQ person who can control their emotions during the bear and bull phases and invests for a long duration had never failed in the 100 odd years of stock market"
I am convinced. The best way (not the easiest) to beat the market is "Pick the right stock and stay for long enough"
Now, how to know which is the right stock? And how long to stay?
Well, the right stock depends on the philosophy we chose for investment. The 2 major ones are "Growth Investing" i.e buy stocks that are in demand and growing as there is future chances that they'll grow better and "Value Investing" i.e buy stocks which are cheap, not easily noticed by mass audience and wait till it reaches it's full potential. The book talks about the latter philosophy, how to pick undervalued stocks.
And to answer how long to stay --> As long as the stock is good and undervalued. Usually it'll be somewhere around 3-5years minimum
Value investing requires a lot of patience to not touch your portfolio. And courage to go against the herd. If you are upto it, then this is the best investment philosophy
P.S: I didn't read "Security Analysis" or "The Intelligent Investor" by Benjamin Graham yet. I felt to start it gently with small books and eventually catch up with those text books
Detailed Notes https://www.notion.so/The-Little-Book-On-Value-Investing-22622e77a7c64db9bb2df3b93b6535d7
Every investor want to pick the 'next-great-stock' and want to be like Warren Buffet but very few (maybe 1%) of the investors actually generate huge wealth. It's not because of lack of intelligence. As said in the book. "The lack of temperament is the main issue for an investor to be wealthy".
"To be wealthy, you don't need an excellent IQ. An average IQ person who can control their emotions during the bear and bull phases and invests for a long duration had never failed in the 100 odd years of stock market"
I am convinced. The best way (not the easiest) to beat the market is "Pick the right stock and stay for long enough"
Now, how to know which is the right stock? And how long to stay?
Well, the right stock depends on the philosophy we chose for investment. The 2 major ones are "Growth Investing" i.e buy stocks that are in demand and growing as there is future chances that they'll grow better and "Value Investing" i.e buy stocks which are cheap, not easily noticed by mass audience and wait till it reaches it's full potential. The book talks about the latter philosophy, how to pick undervalued stocks.
And to answer how long to stay --> As long as the stock is good and undervalued. Usually it'll be somewhere around 3-5years minimum
Value investing requires a lot of patience to not touch your portfolio. And courage to go against the herd. If you are upto it, then this is the best investment philosophy
P.S: I didn't read "Security Analysis" or "The Intelligent Investor" by Benjamin Graham yet. I felt to start it gently with small books and eventually catch up with those text books
Detailed Notes https://www.notion.so/The-Little-Book-On-Value-Investing-22622e77a7c64db9bb2df3b93b6535d7
December 23, 2020
Helpful book
May 1, 2007
I read this book today in a few hours. Very well-written. And very understandable. It's actually a more drawn out treatment of a study on Tweedy, Browne's website, called, "What Has Worked In Investing."
It's great, too, because it's peppered liberally with many historical examples from Chris Browne's long, successful career as an investor.
Every now and then, he lets something slip, like when he says you'd have avoided the 1929 crash using Ben Graham's principles. In reality, of course, Graham was leading a guilded life, he was using way too much margin (just like everybody else) and his lifestyle was cut back dramatically for several years before he recovered. He bet the initial crash was the end of it, too, and got hammered on the next leg down. So, Browne is wrong. You can't avoid market crashes by doing what Graham did, as Graham himself proved.
But that's nit-picky. If this is the first investing book you ever read, you're lucky to start out with one this good.
It's great, too, because it's peppered liberally with many historical examples from Chris Browne's long, successful career as an investor.
Every now and then, he lets something slip, like when he says you'd have avoided the 1929 crash using Ben Graham's principles. In reality, of course, Graham was leading a guilded life, he was using way too much margin (just like everybody else) and his lifestyle was cut back dramatically for several years before he recovered. He bet the initial crash was the end of it, too, and got hammered on the next leg down. So, Browne is wrong. You can't avoid market crashes by doing what Graham did, as Graham himself proved.
But that's nit-picky. If this is the first investing book you ever read, you're lucky to start out with one this good.
June 11, 2014
Despite how brief this book is, I still felt like I was skimming through a lot of it. Value investors are understandably super gung-ho about their approach and at a certain point it turns into a soothing susurration. I get it, though, because his (and their) point is to really drill the temperament aspect into your head, which takes time. Anyway, it's his stuff about how to put things on the "no thank you pile" that I really liked plus there was some interesting stuff about how different choices in how to liquidate when it's time to retire make big differences down the road.
February 1, 2021
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March 12, 2021
A good introduction to value investing. This book can be a starting point for learning for a lot of new investors who are entering the market.
July 9, 2009
Why I Read this Book: With the intensity of today’s market, I wanted a quick recap of true value investing. This hit all the key points.
Review:
Whether you are a savvy investor or are just beginning, this is a great book to pick up. You reading this post shows me that you most likely have a keen interest in investing which leads me to believe you have been following the market lately. It’d be very hard not to given all that’s gone on. At times it seems like the market is falling apart. Many of you may know the feeling of checking one of your investments over the past couple weeks and feeling incredible excitement or total dread as you watched it’s price drop by 10 or 20% or jump by an equal amount. It really is hard to digest. This is when it’s most important to remember what value investing really is.
This little book of value helps us remember where we should and should not be focusing our investment time and effort (or stress and anxiety for that matter). I will be the first to say that with today’s incredibly volatile and potentially gut-wrenching market, I could use a call back to the basics. This short, easy read was a huge help. Simply stated, what this book and so many other value investing books will tell you is to stop spending your time worrying about all this short-term chaos. If you focus on buying great, proven businesses and keeping them for years on end, these short-term fluctuations should be nothing but excitement that your favorite businesses may be going on sale. Tell me anyone who doesn’t like it when their favorite products go on a huge sale. The stock market is no different.
The ‘Little Book’ series has been a great supplement to my ever-growing value investing education. I am always open to new thoughts and ideas and when it comes to investing, especially value investing. I am all ears to hear new explanations. What’s so nice and refreshing about value investing is that no matter who describes it, the same few simple ideas come up. On one hand you could say that once you have read one book on the subject, you have read it all, but it’s not until you really dig into the subtleties of one’s approach that you start to see what makes great value investors. For most of you, this material is nothing too new, but some nice reinforcement is important from time to time.
Christopher Browne has had a very successful career that dates back to the days when Ben Graham and Warren Buffett were running their own money and their own funds. His stories and experiences with the investment greats of the past century go a long way in hammering home his points. You will find a new spin on all the classic fundamentals of margin of safety, Mr. Market, focusing on earnings and profitability over sexiness and popularity, only buying when prices are cheap, and most importantly, keeping a good head and sound discipline when investing the way in which it was meant to be done.
Value investing happens to be a great passion of mine, which is why my partner and I founded our own value fund, Cumbre Capital Partners. Even with all we have learned, done and experienced over the years, I can’t tell you the importance of continuing to reinforce the basic fundamentals as Browne touches upon here. More than anything, value investing is a huge test of will and discipline. It’s easy to buy and sell whatever is ‘hot’ or ’sexy’ at the time, but it is entirely different to have the conviction and discipline to stand behind an investment and approach, when everyone else is telling you why you’re wrong and why your ideas will fail. It still blows me away why the most proven investment approach of all time is still so rarely adopted in practice but I think the answer comes down to one word, discipline.
And it’s no coincidence that this is one word that the most successful people in the world have in common. Whether the space be investing, personal coaching, relationships, professional sports, the arts or anything else, rock solid determination is what has lead to success beyond what most thought was possible. As you journey down the road less traveled to success, at times it will seem like everyone wants you to fail or has lost hope in you, and it is then when you find out what true success is made of. This is one of the reasons I love value investing. It is the discipline and ability to swim against the current with complete certainty, despite what others tell you.
Now more than ever is this the case in a value investor’s career. We are being severely tested. If any of you search for articles of Warren Buffett in the late 1990’s, you would have seen reports indicating ‘Warren has lost his touch’ and that ‘he doesn’t understand this technology stuff’. What did he do in response? He kept doing exactly what he’d done for past 50 years while he watched the dot com bubble burst in everyone’s face. And look at him now. His value approach has put him in a better place than anyone in today’s daunting market, so remember that as these volatile times test your conviction. And no matter your experience level, do not be afraid to pick up a new book to reinforce what you have already learned so many times in the past. It may be just what you need to remind you of the incredible opportunity these times are presenting. If nothing else, hopefully it will get you to shut off Google Finance for a few hours or a few weeks and to sit tight with the wonderful businesses you probably already own. After all, time is the dear friend of the great business. See you in the market.
-Reading for Your Success
Review:
Whether you are a savvy investor or are just beginning, this is a great book to pick up. You reading this post shows me that you most likely have a keen interest in investing which leads me to believe you have been following the market lately. It’d be very hard not to given all that’s gone on. At times it seems like the market is falling apart. Many of you may know the feeling of checking one of your investments over the past couple weeks and feeling incredible excitement or total dread as you watched it’s price drop by 10 or 20% or jump by an equal amount. It really is hard to digest. This is when it’s most important to remember what value investing really is.
This little book of value helps us remember where we should and should not be focusing our investment time and effort (or stress and anxiety for that matter). I will be the first to say that with today’s incredibly volatile and potentially gut-wrenching market, I could use a call back to the basics. This short, easy read was a huge help. Simply stated, what this book and so many other value investing books will tell you is to stop spending your time worrying about all this short-term chaos. If you focus on buying great, proven businesses and keeping them for years on end, these short-term fluctuations should be nothing but excitement that your favorite businesses may be going on sale. Tell me anyone who doesn’t like it when their favorite products go on a huge sale. The stock market is no different.
The ‘Little Book’ series has been a great supplement to my ever-growing value investing education. I am always open to new thoughts and ideas and when it comes to investing, especially value investing. I am all ears to hear new explanations. What’s so nice and refreshing about value investing is that no matter who describes it, the same few simple ideas come up. On one hand you could say that once you have read one book on the subject, you have read it all, but it’s not until you really dig into the subtleties of one’s approach that you start to see what makes great value investors. For most of you, this material is nothing too new, but some nice reinforcement is important from time to time.
Christopher Browne has had a very successful career that dates back to the days when Ben Graham and Warren Buffett were running their own money and their own funds. His stories and experiences with the investment greats of the past century go a long way in hammering home his points. You will find a new spin on all the classic fundamentals of margin of safety, Mr. Market, focusing on earnings and profitability over sexiness and popularity, only buying when prices are cheap, and most importantly, keeping a good head and sound discipline when investing the way in which it was meant to be done.
Value investing happens to be a great passion of mine, which is why my partner and I founded our own value fund, Cumbre Capital Partners. Even with all we have learned, done and experienced over the years, I can’t tell you the importance of continuing to reinforce the basic fundamentals as Browne touches upon here. More than anything, value investing is a huge test of will and discipline. It’s easy to buy and sell whatever is ‘hot’ or ’sexy’ at the time, but it is entirely different to have the conviction and discipline to stand behind an investment and approach, when everyone else is telling you why you’re wrong and why your ideas will fail. It still blows me away why the most proven investment approach of all time is still so rarely adopted in practice but I think the answer comes down to one word, discipline.
And it’s no coincidence that this is one word that the most successful people in the world have in common. Whether the space be investing, personal coaching, relationships, professional sports, the arts or anything else, rock solid determination is what has lead to success beyond what most thought was possible. As you journey down the road less traveled to success, at times it will seem like everyone wants you to fail or has lost hope in you, and it is then when you find out what true success is made of. This is one of the reasons I love value investing. It is the discipline and ability to swim against the current with complete certainty, despite what others tell you.
Now more than ever is this the case in a value investor’s career. We are being severely tested. If any of you search for articles of Warren Buffett in the late 1990’s, you would have seen reports indicating ‘Warren has lost his touch’ and that ‘he doesn’t understand this technology stuff’. What did he do in response? He kept doing exactly what he’d done for past 50 years while he watched the dot com bubble burst in everyone’s face. And look at him now. His value approach has put him in a better place than anyone in today’s daunting market, so remember that as these volatile times test your conviction. And no matter your experience level, do not be afraid to pick up a new book to reinforce what you have already learned so many times in the past. It may be just what you need to remind you of the incredible opportunity these times are presenting. If nothing else, hopefully it will get you to shut off Google Finance for a few hours or a few weeks and to sit tight with the wonderful businesses you probably already own. After all, time is the dear friend of the great business. See you in the market.
-Reading for Your Success
December 29, 2018
I may be biased - I have already been converted to value investing so this book read nicely to me. It's one of the few to back up statements with research and as such has a nice blend of evidence with experience from the author. US focused but completely applicable to anyone living in a developed country.
In my top 5 books on investing. Recommended.
In my top 5 books on investing. Recommended.
April 24, 2024
It was good. Not the best out of the series, but this may because I am already a die hard value investor. It reinforced my commitment to value investing. My favorite book in the series is “The little book that builds wealth” by Pat Dorsey.
Read
March 4, 2021I think the book is very helpful for you if you like money or investing because it guides you through the things you need to know. That's really all the book is about.
March 22, 2021
Short and to the point. I wish more books were like this one.
February 26, 2023
Excellent primer on value investing.
February 15, 2022
A bit outdated, but the core themes should resonate with all professional and amateur investors—as opposed to speculators (e.g. crypto bros, “technical” analysts and other deluded sources of naïve capital).
August 30, 2021
RR: quick read with helpful information
September 2, 2018
Some notes:
1. Buy stocks on sale like any other products
-> People tend to do the opposite of this because:
FOMO, like to own hot stuff, follow crowd emotions
2. 2 basic principles of value investing:
- Intrinsic value: a.k.a book value (net worth), real value of the business
- Margin of safety
-> For short-term, stock prices fluctuate by market sentiments, crowd emotions
For long run, stock prices reflect correctly with intrinsic value
-> Use intrinsic value to seek for bargains in buying good stocks
because stocks often being mispriced, either overvalued or undervalued
-> Use a set of finiancial ratios or appraisal methods (ex: similar M&A)
3. Margin of safety
-> hard to estimate the exact intrinsic value and impact from many factors in future
can rely on past performance, but the past is the past
-> need a cushion to allow room for errors
-> classic Ben Graham margin of safety is stock price selling no more than 2/3 intrinsic value
-> portfolio diversification
-> a contrarian investor: buy when stocks are cheap, when people sell and sell when poeple buy
-> Keep the head cool and stay calm!!
4. Seek for insider's actions
5. Take inflation or exchange rate into account (if there is)
6. Sometimes, cheap price is not that good -> should do further analysis before buying
7. Stock price falls often because:
- Too much debt
- Increased competition in the industry
- Obsolete technology, depend too much on technology -> easy to be out-of-date
-> stay away from those companies
-> Seek for companies that:
- have durable competitive advantages: brand name, patents, advanced techs,...
- easy to understand and evaluate the business
8. Make some criteria to filter out bad stocks. Using:
- P/E, P/B, P/S, PEG
- Free cash flow
9. Do further analysis using:
- Balance sheet:
-> how much asset, howmuch debt?
-> assess solvency and liquidity of the business
- Income statement:
-> how much profit, earnings, dividends?
-> assess profitability, dividend pay-out
10. Quality checklist:
- Can raise price?
- Can make more profit?
- Can control expense?
- Compare to other business in the industry
- How about excess cash?
- How stable the company financing?
- Insiders doing what?
- Future plans?
...
11. Strategy: buy and hold!!
1. Buy stocks on sale like any other products
-> People tend to do the opposite of this because:
FOMO, like to own hot stuff, follow crowd emotions
2. 2 basic principles of value investing:
- Intrinsic value: a.k.a book value (net worth), real value of the business
- Margin of safety
-> For short-term, stock prices fluctuate by market sentiments, crowd emotions
For long run, stock prices reflect correctly with intrinsic value
-> Use intrinsic value to seek for bargains in buying good stocks
because stocks often being mispriced, either overvalued or undervalued
-> Use a set of finiancial ratios or appraisal methods (ex: similar M&A)
3. Margin of safety
-> hard to estimate the exact intrinsic value and impact from many factors in future
can rely on past performance, but the past is the past
-> need a cushion to allow room for errors
-> classic Ben Graham margin of safety is stock price selling no more than 2/3 intrinsic value
-> portfolio diversification
-> a contrarian investor: buy when stocks are cheap, when people sell and sell when poeple buy
-> Keep the head cool and stay calm!!
4. Seek for insider's actions
5. Take inflation or exchange rate into account (if there is)
6. Sometimes, cheap price is not that good -> should do further analysis before buying
7. Stock price falls often because:
- Too much debt
- Increased competition in the industry
- Obsolete technology, depend too much on technology -> easy to be out-of-date
-> stay away from those companies
-> Seek for companies that:
- have durable competitive advantages: brand name, patents, advanced techs,...
- easy to understand and evaluate the business
8. Make some criteria to filter out bad stocks. Using:
- P/E, P/B, P/S, PEG
- Free cash flow
9. Do further analysis using:
- Balance sheet:
-> how much asset, howmuch debt?
-> assess solvency and liquidity of the business
- Income statement:
-> how much profit, earnings, dividends?
-> assess profitability, dividend pay-out
10. Quality checklist:
- Can raise price?
- Can make more profit?
- Can control expense?
- Compare to other business in the industry
- How about excess cash?
- How stable the company financing?
- Insiders doing what?
- Future plans?
...
11. Strategy: buy and hold!!
October 8, 2022
There was nothing in this book that I did not know already. If you know about fundamental analysis then you can safely skip this book. It reads dryly and lacks practical tacit. At best it just glorifies the author and Value Investing. I am a believer in value investing, but I found myself disappointed. This was my first book from The Little Book series, and I not sure if I'll read another of The Little Book again. It's good primer for begineers though.
Read
February 4, 2016Less a value investing primer than a folksy & affable compendium of investing vignettes from the lamentably departed Tweedy Browne chairman. With a gift for metaphor, Browne was perhaps at his wittiest and most sensible describing the difference between traditional money-manager interviews and the questions one should actually ask of people running your money. Thanks for a good read & RIP.
November 25, 2007
If you're reading this, hope its just a review of what you know already. If not, hope this opens you up for further research/study. If neither, there is a high probability that you are not suited for this.
August 4, 2015
What I took away from this book was that Value Investing is an Art that requires alot of patience and fortitude. There is no magic formula to determine the 'intrinsic value' of a company. Any criteria (be it P/E, net asset value,..., etc.) is going to have fuzzy edges and drawbacks.
September 2, 2014
This little book is a must read if you are a value investor. After Ben Graham'S Intelligent investor, this little boom stands out for it's simplicity and clarity.
December 2, 2015
Good for beginners/amateurs
March 20, 2016
very valuable and practical advice. need money to make the ideas work
Read
January 22, 2016A neat and succint package with enough insights on value investing mindset, process and temperament required.
August 14, 2019
Like other awesome books in the Little book series that I have enjoyed reading (The Little Book That Beats the market by Joel Greenblatt, The Little Book that Builds Wealth by Pat Dorsey), The Little Book of Value Investing by Christopher H. Browne is an awesome book to understand the field of value investing. The little book series offers tons of value to understand the field of investing. The books are written very precisely & clearly.
The Little Book of Value Investing by Christopher H. Browne is an awesome book to understand the field of value investing. It extensively covers all the aspects value investing i.e. intrinsic value, Behavioral Psychology, valuation of stock investing.
Value Investing is distinct from momentum investing. The basis of Momentum investing is to focus on the trends of the market and price fluctuation, whereas Value Investing is to focus on buying stocks with significant margin of safety in terms of price & business and hold it for a long period of time.
The Value Investing in simple terms is buying securities for less than their intrinsic value on the basis of their underlying business distinct from what is happening at the superficial level of the market. If a stock is selling for less than its intrinsic value, there is high probability that market will ultimately realize the value of the stock and the price will rise to a level more indicative of the company’s worth.
It’s difficult to practice Value Investing in this era of hyper-information as it means being contrarian to the bets of market pricing. When stock price climbs, research reports sell the strategy of buying, and when stock price fall, the research reports tells us to generally hold. Investors are generally afraid of being left behind and like the idea of owning the popular stocks everyone is talking about. This herd mentality impacts everybody be it individual retail investors or professional portfolio managers. The mindset that allows investors to be comfortable losing money as long as everyone else is losing money too. It’s difficult to be contrarian.
The reputational and career risk of being a contrarian is far greater than the risk of going with the flow in a short term. Value investing requires the ability of going against the herd, and the risk of being called a dummy from time to time.
Price to book value, price to earnings ratio, price to net current assets give very good sense about the valuation of the company. Consistent insider buying of stocks selling at low multiples of earnings is a good indication about the business potential of the company. Stocks with fair valuation and consistent insider buying performs far better.
The Little Book of Value Investing by Christopher H. Browne is an awesome book to understand the field of value investing. It extensively covers all the aspects value investing i.e. intrinsic value, Behavioral Psychology, valuation of stock investing.
Value Investing is distinct from momentum investing. The basis of Momentum investing is to focus on the trends of the market and price fluctuation, whereas Value Investing is to focus on buying stocks with significant margin of safety in terms of price & business and hold it for a long period of time.
The Value Investing in simple terms is buying securities for less than their intrinsic value on the basis of their underlying business distinct from what is happening at the superficial level of the market. If a stock is selling for less than its intrinsic value, there is high probability that market will ultimately realize the value of the stock and the price will rise to a level more indicative of the company’s worth.
It’s difficult to practice Value Investing in this era of hyper-information as it means being contrarian to the bets of market pricing. When stock price climbs, research reports sell the strategy of buying, and when stock price fall, the research reports tells us to generally hold. Investors are generally afraid of being left behind and like the idea of owning the popular stocks everyone is talking about. This herd mentality impacts everybody be it individual retail investors or professional portfolio managers. The mindset that allows investors to be comfortable losing money as long as everyone else is losing money too. It’s difficult to be contrarian.
The reputational and career risk of being a contrarian is far greater than the risk of going with the flow in a short term. Value investing requires the ability of going against the herd, and the risk of being called a dummy from time to time.
Price to book value, price to earnings ratio, price to net current assets give very good sense about the valuation of the company. Consistent insider buying of stocks selling at low multiples of earnings is a good indication about the business potential of the company. Stocks with fair valuation and consistent insider buying performs far better.
May 3, 2023
This is basically my summary of the book for my reference. I compare all value investing books to the intelligent investor by Ben Graham. While this repeats much of the info there he does add some insight.
Page 20 - Historically dividends have been 3-4 %
long term earnings growth 6% (inflaction 3% GDP growth 3%)
Page 41
Be Global
Developed countries only
Page 57 ( Western Europe, Japan, Canada, New Zealand, Australia, singapore)
PJN: Not using GAPP, need to learn country requlation
Page 59-60 - Insider trading
1. There is only one logical reason for an insider to buy stock on the open market
2. BOD decides to Buy back stock at market
PJN: I have observed that some high-flying companies buy back stock for espp and
options and it may not be a good investment.
Page 72
* Stocks on Sale
1. Below Book value
2. low P/E
3. stock fallen 50% in 3 month period
4. Insider Buying
* Look at ownership by Value mutual funds (doesn't work for micro caps because they may
be too small
* look at letters to share holders
* look @ prices paid for corporate mergers/takeovers
PJN: Be careful of stock swaps. Company A's stock maybe over valued when purchasing
company B
Page 79
Ben Graham ( Simple yard stick)
Company should own twices as much as it owes or
dept/equity < .5
Page 102 Chapter 8
1. What is the outlook for pricing for the company's product? Can the company raise prices?
2. Can the company sell more? What is the outlook for units?
3. Can the company increaes profits on existing sales? What is the outlook for gross profit margin?
4. Can the company control expenses?
5. If the company does reais sales, how much will fall to the bottom line?
6. Can the company be as profitable as it used to be or at least as profitable as its competitors?
Does the company have one-time expenses that will not have to be paid in the future?
8. Does the company have unprofitable operations they can shed?
9. Is the company comfortable with Wall Street earnings estimates?
10. How much can the company grow over the next 5 years?
11 What will the company do with the excess cash generated by the business?
What does the company expect it's competitors to do?
12. How does the company compare financially with other companies in the same business?
14. What would the company be worth if it were sold?
15. Does the company plan to buyback stock?
16 What are the insiders doing?
Page 136-137
"I like to keep three years of spending in short-term bonds to smooth out any down years in the portfolio .... My own experience over the years is that although the broad market averages can take longer than three years to recover after a particularly nasty bear market, most value investors make up their losses in far less time"
Page 20 - Historically dividends have been 3-4 %
long term earnings growth 6% (inflaction 3% GDP growth 3%)
Page 41
Be Global
Developed countries only
Page 57 ( Western Europe, Japan, Canada, New Zealand, Australia, singapore)
PJN: Not using GAPP, need to learn country requlation
Page 59-60 - Insider trading
1. There is only one logical reason for an insider to buy stock on the open market
2. BOD decides to Buy back stock at market
PJN: I have observed that some high-flying companies buy back stock for espp and
options and it may not be a good investment.
Page 72
* Stocks on Sale
1. Below Book value
2. low P/E
3. stock fallen 50% in 3 month period
4. Insider Buying
* Look at ownership by Value mutual funds (doesn't work for micro caps because they may
be too small
* look at letters to share holders
* look @ prices paid for corporate mergers/takeovers
PJN: Be careful of stock swaps. Company A's stock maybe over valued when purchasing
company B
Page 79
Ben Graham ( Simple yard stick)
Company should own twices as much as it owes or
dept/equity < .5
Page 102 Chapter 8
1. What is the outlook for pricing for the company's product? Can the company raise prices?
2. Can the company sell more? What is the outlook for units?
3. Can the company increaes profits on existing sales? What is the outlook for gross profit margin?
4. Can the company control expenses?
5. If the company does reais sales, how much will fall to the bottom line?
6. Can the company be as profitable as it used to be or at least as profitable as its competitors?
Does the company have one-time expenses that will not have to be paid in the future?
8. Does the company have unprofitable operations they can shed?
9. Is the company comfortable with Wall Street earnings estimates?
10. How much can the company grow over the next 5 years?
11 What will the company do with the excess cash generated by the business?
What does the company expect it's competitors to do?
12. How does the company compare financially with other companies in the same business?
14. What would the company be worth if it were sold?
15. Does the company plan to buyback stock?
16 What are the insiders doing?
Page 136-137
"I like to keep three years of spending in short-term bonds to smooth out any down years in the portfolio .... My own experience over the years is that although the broad market averages can take longer than three years to recover after a particularly nasty bear market, most value investors make up their losses in far less time"
June 6, 2019
This was my first book on value investing and now having read multiple books on the subject, I came back to write a review for this amazing little book that left a lasting impression on me. Although I began with The Intelligent Investor by Benjamin Graham, the father of value investing, I couldn't complete that book as I felt it was dry. I shifted to online blogs and articles until I came across this book.
While I won't comment on the content, I would just like to say that the author has a nice way of analogizing which makes the book very pleasurable to read. Till the end he gives nice little analogies, the memories of which have to stuck to me. I will say the book gives a bird's view of value investing and thus serves as a very good introductory book.
Here is one of my favorite parts (Just to show you how the book is a pleasant read).
"Value stocks are about as exciting as watching grass grow. But have you ever noticed just how much your grass grows in a week?
Value investors are more like farmers. They plant seeds and wait for the crops to grow. If the corn is a little late in starting because of cold weather, they don’t tear up the fields and plant something else. No, they just sit back and wait patiently for the corn to pop out of the ground, confident that it will eventually sprout."
I'd say the best quotes on value investing might actually be from Christopher H. Browne!
If you want to read deeper into value investing, I suggest the "The Intelligent Investor" (if you haven't read it already) and "Creating a portfolio like Warren Buffet" by Jeeva Ramaswamy.
While I won't comment on the content, I would just like to say that the author has a nice way of analogizing which makes the book very pleasurable to read. Till the end he gives nice little analogies, the memories of which have to stuck to me. I will say the book gives a bird's view of value investing and thus serves as a very good introductory book.
Here is one of my favorite parts (Just to show you how the book is a pleasant read).
"Value stocks are about as exciting as watching grass grow. But have you ever noticed just how much your grass grows in a week?
Value investors are more like farmers. They plant seeds and wait for the crops to grow. If the corn is a little late in starting because of cold weather, they don’t tear up the fields and plant something else. No, they just sit back and wait patiently for the corn to pop out of the ground, confident that it will eventually sprout."
I'd say the best quotes on value investing might actually be from Christopher H. Browne!
If you want to read deeper into value investing, I suggest the "The Intelligent Investor" (if you haven't read it already) and "Creating a portfolio like Warren Buffet" by Jeeva Ramaswamy.
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