Post deleted by Mat Sklansky

[Paluka]

[ QUOTE ]
-Market Wizards
Give a brief synopsis of the book
-Stories about dudes who made alot in the market
What was good about the book?
- Taught me that the many people who made money where smarter, better financed, and more disciplined than I would ever be. Lot's of other people in the book just got lucky in my opinion.


[/ QUOTE ]

All of the Market Wizards books are very hit or miss. Half the people profiled are smart guys who got lucky. The other half are just guys who got lucky.

[Evan]

haha. Thanks dude, I'm trying.

[lu_hawk]

Intelligent Investor should be read but that has already been mentioned. Security Analysis should be read after that. Think of these 2 as kind of like HPFAP. They lay the groundwork for profitable play but many concepts don't apply very well to the games you're likely to be playing in. For loose games SSH applies much better.

Ben Graham's books lay the groundwork for how to think about investing(keep things simple and buy things for less than they are worth) but his favorite methods and the ones he talks about most involve buying at a discount to book value or net current assets or whatever the measure may be. Those things don't apply very well to the US market anymore but it doesn't matter as long as you grasp the central idea.

My favorite SSH-type book that does apply very well is 'You Can Be A Stock Market Genius' by Joel Greenblatt. Not very well known but the author has been super successful and the book is invaluable.

And valueinvestorsclub.com is the 2+2 of value investing.

[Evan]

Have you actually read Security Analysis? That thing is giant. If there's actually someone that could get through that thing I am very impressed.

I'm not crazy about your statement that Graham's ideas are not applicable to today's market. The idea of "new markets" that no longer follow historical rules (for lack of a better word) was largely responsible for the widespread overpricing of today's market as a whole. I would be wary of such ideas.

[lu_hawk]

I'm not saying there are new markets, I still believe that the best way to invest is to buy things for less than they are worth. But run a stock screen to find some of Graham's net nets. You won't find any. Back in Graham's day there were plenty to pick from. There are still undervalued stocks out there but if you only use Graham's methods then you probably won't find them. Even Buffett has said that he no longer agrees with many of Graham's methods for identifying undervalued securities. But Graham's basic idea of value investing is still as valid today as it was then and will continue to be valid.

I read the 1934 edition of Security Analysis a few years ago. Then when I got out of school my boss required me to read the 1940 version. They are very similar but Buffett was on record somewhere saying he thought the 1940 version was the best.

[FatOtt]

[ QUOTE ]
I'm not crazy about your statement that Graham's ideas are not applicable to today's market. The idea of "new markets" that no longer follow historical rules (for lack of a better word) was largely responsible for the widespread overpricing of today's market as a whole. I would be wary of such ideas.


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My issue with Graham's books are that they're so focused on net tangible assets. I certainly don't agree with the notion of a "New Economy" and I believe that the general idea of buying something for less than it's worth is exactly on target (if not obvious). But one issue that comes up is that accounting standards don't do a good job of recording intangible assets. So too much emphasis on Graham would probably lead you away from firms like pharmaceutical companies because much of their value doesn't show up on the balance sheet.

Yes, you can still look at core earnings power for firms like this, but I don't think that the stocks that Graham would end up buying are the ones that I would like to own. It's similar to when Buffett "saw the light" and purchased See's Candies back in the 70's, even though Graham would have considered it overpriced. I think Charlie Munger and Philip Fisher have contributed to Buffett's conversion from a cigar butt investor to someone who's willing to pay more for a high-quality business.

Two books that I don't think have been mentioned are Bruce Greenwald's Value Investing and Fisher's Common Stocks...

[Evan]

Great post. Very valid point and well said.

I remember a section in Security Analysis where Graham talks about the importance of valuing intangible assets correctly but I don't know how deep he goes into the actual process of doing so.

[squiffy]

Warren Buffet Way

Warren Buffet Portfolio

Both by Robert Hagstrom.

Gives a good basic explanation of one conservative approach to investing -- buying and holding and outstanding company that is temporarily undervalued.

You need to supplement it with other readings. But it's a good basic start for people interested in picking their own stocks.