Strategic Value Investing: Practical Techniques of Leading Value Investors 1st Edition

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DDM -Dividend Discount model that has been touted by many academics (finance folks, not accounting folks) is completely outdated (Columbia Business School Professor Stephen Penman says so, I agree with him).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.

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 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.

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.

Very useful. Easy to read and understand.