This is long, but excellent stuff.
Charles Munger, USC Business School, 1994 A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business
The discussion on efficient markets is also really good here.
he is a true great…
http://www.forbes.com/forbes/1998/1012/6208110a_print.html
Samuelson is the economist who invested in Berk.
i have tried to get as many things on munger as possible…love his almanac book…a must read for the perverted mind…if you find other stuff please share…i recommend his wesco shareholder reports though they’re not as good as buffets…
get the almanac…the man is literally a genius…smartest guy in the investing world in my view…love the way he talks too…its so condescending yet so right…
Hey Frank, are there any books on financial statement analysis that are useful to a value investment perspective? Some case studies could be useful too. You’re right, I do need to get better at reading statements, I just currently gloss over them and focus on understanding the business, but to get to the next level, I’ll need a better grasp of this stuff.
the best fin statement analysis book i ever read was Graham and Dodd even though they didn’t do sophisticated analysis, it gave you a framework to look at financial statements (except cash flow).
…you will notice that all of the nuanaces should be explained in the notes. so if there is something you don’t understand accounting wise, it should be explained in “accounting principles” etc, otherwise, ignore the company immediately. also, read nongaap disclosures as much as possible. you will find out what gaap accounting flaws/benefits are.
there is a book called: Financial Statement Analysis and Security Valuation By Pennman. I didn’t read all of it as it was very detailed but it does provide a lot! of real life examples with companies you’re familiar with. you pick at it as you please. there are tons of them out there Damodaran etc. i don’t find them too helpful though. the important stuff was basically in the CFA program.
Frank, did you ever read “What works on Wall Street” by James P. O’Shaughnessy?
yupe…impression i have if i recall correctly is equity funds/value (certain metrics like low p/e and stuff) outperforms in the long run…he wrote two books basically supporting the same thing if i recall correctly.
Yep, according to O’Shaughnessy, value and momentum both work, and they work better together.
right now, i’m trying to get my hands on more business history books. any recommends would be great.
Not a book, but interesting nonetheless.
http://www.economics.harvard.edu/files/faculty/51_This_Time_Is_Different.pdf
I read “this time is different”…its quite chilling to know financial recessions cause protracted periods of stagnation, but it does make sense intuitively.
the question after reading this is, should i still buy good companies in Europe?
I’d buy good companies, but I’d only buy the nonsystemic part of them.
I wouldn’t shy away from a multinational that just happens to be based in Europe - Total S.A. for example. Otherwise I’d get the hell out of Europe. Not enough upside…yet.
Macroeconomic uncertainty is best time to make an investment IMO. I would say move slowly and identify the euro firms that have global exposure, places like Unilever/Roche etc. Stable cash flows yadda yadda.
Needless to say, stay away from firms with EU govts as customers (BAE Systems etc).
let me brush off my pellet gun than…put some elastic bands to use…
i saw this hot classy babe down stairs sitting there with her legs crossed dangling her heels…so classy…
I’m currently reading “What works on Wall Street”. O’Shaughnessy is actually not a supporter of P/E. His studies show P/S to be the best metric, with P/B close behind.
As for momentum, he believes in short-term. In the long-term (5 years and more), the forces of mean reversion rears its ugly head.
The best strategy according to him is to buy stocks with a P/S ratio below 1, that have also shown the biggest price increases during the previous year. A 50 stock portfolio comprised of that strategy has returned close to 20% annually during the last 60 years, while having a standard deviation of 16%.
O’shaunghnessy has a fund at Royal Bank of Canada and if i recall correctly, it was pretty good, actually, it beat most ppl…
Yeah, i read that one and another one. its worthwhile to sift through…
Yeah, P/S was the big one. That’s a little suspect because his book was published during or just after the internet boom of the 1990s when sales really did seem to be a strong signal. I’d personally trust the P/B numbers more going forward. And momentum was basically one year price returns. Portfolios were equally weighted.
The interesting results were things that didn’t seem to help. Earnings growth was pretty uninfluential. Presumably it is a coincident indicator of stock price rather than a leading one.
i only use p/b for banks & Insurance…