This is another book in The Little Book series published by John Wiley & Sons. The title is The Little Book of Value Investing by Christopher Browne. I also reviewed these other books in The Little Book series:
- The Little Book That Beats the Market by Joel Greenblatt
- The Little Book of Bull Moves in Bear Markets by Peter Schiff
The author Christopher Browne is a Managing Director of Tweedy, Browne, which is a money management company with $7.6 billion under management as of the end of 2008. Tweedy, Browne boasts its 80-year history and its role as the broker for Benjamin Graham, the father of value investing. It is one of the most well known firms for following the value investing strategy.
The concept of value investing is very simple: buy stocks on sale, with a margin of safety. Its counterpart is growth investing: buy stocks of companies with above-average growth. There is also a hybrid: growth at a reasonable price (GARP). In principle, value investing is intuitive. We all would like to buy stuff on sale as opposed to paying the full price or paying an inflated price. However, the tricky part is figuring out if a stock is really on sale, or what the so-called intrinsic value is. This book explains the tenets of value investing clearly and thoroughly (see table of contents). It tells you how someone following the value investing philosophy looks for values, although it does not prescribe a magic wand as in Rule #1 or Magic Formula Investing. If after reading the book you feel like it’s missing the cookbook recipes for putting what you learned into practice, don’t blame the book. This is a little book, not Security Analysis by Graham and Dodd. Value investing is an art. It requires hard work, experience, courage, patience, and perhaps lack of bad luck. Even the most experienced value managers can’t hit it right all the time. It cannot be reduced to some simple triggers.
I like value investing. My mutual funds portfolio is about 3/4 value, 1/4 growth. I do my value investing through value index funds. I don’t play amateur value manager by analyzing company financial statements. Nor do I buy actively managed value funds. That’s a personal preference. I looked up the performance of some funds managed by well known value managers, including Tweedy, Browne. They have delivered good results.
Rating: **** (good). You will learn something.
Tweedy, Browne also published a white paper What Has Worked In Investing, which makes the case for value investing.