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The Business of Value Investing
Six Essential Elements to Buying Companies Like Warren Buffett
Sham M. Gad (Author)
9780470444481, Wiley
Hardback, published 29 October 2009
288 pages, Drawings: 4 B&W, 0 Color; Tables: 26 B&W, 0 Color
23.6 x 16 x 2.5 cm, 0.481 kg
A blueprint to successful value investing Successful value investors have an ingrained mental framework through which all investments decisions are made. This framework, which stems from the father of value investing, Benjamin Graham-who believed that investment is most intelligent when it is most businesslike-can put you in a better position to improve the overall performance of your portfolio. Written by Sham Gad-founder of the Gad Partners Funds, a value-focused investment partnership inspired by the 1950s Buffett Partnerships-The Business of Value Investing effectively examines the fundamental tenants of this approach and skillfully illustrates the six essential elements of the entire process. Opening with some informative discussions of how value investing focuses more on buying a piece of a business, and less on buying a company's stock, this reliable resource quickly moves on to detail exactly what it takes to become a successful value investor. With The Business of Value Investing as your guide, you'll quickly become familiar with one of the most effective investment strategies ever created.
Acknowledgments xiii Introduction xvii Chapter 1 Invest in the Business, Buy the Stock 1 Stock Prices are More Noise Than Information 4 A Businesslike Approach to Valuing the Business 6 The Making of a Legend 11 A Simple Idea, Really 14 Chapter 2 The Only Three Types of Investments You Need to Know 15 Stocks Prices aren’t Always Rational 16 The Business Side of Investing 17 Three Buckets: Undervalued, Overvalued, and Fairly Valued 21 Price Determines Value 24 Key Takeaways 31 Chapter 3 The Six Elements of Intelligent Investing 33 All Investing is Value Investing 35 Learn from the Masters 38 The Sum of Its Parts: A Fundamental Framework 39 A Mental Latticework 42 Overview of the Six Elements 43 Emphasize the Process, Not the Outcome 46 Key Takeaways 46 Chapter 4 Establish a Sound Investment Philosophy The First Element 47 Preservation of Capital is the Name of the Game 49 Price Paid Determines Value Received 52 The Starting Point Matters 54 Avoid Using Margin 61 Focus on Absolute Returns 64 Key Takeaways 66 Chapter 5 Develop a Search Strategy The Second Element 67 Ignore the Media 69 Imitation is the Sincerest Form of Flattery 72 Basic Search Strategies 75 Advanced Search Strategy 85 Key Takeaways 89 Chapter 6 Effective Business Valuation The Third Element 91 Value Investing 101: Margin of Safety 92 Value Investing 201: Intrinsic Value 95 Value Investing 301: Seek Businesses with a Wide Moat 101 Value Investing 401: Calculating a True Intrinsic Value 106 The Value of Management 111 Understanding Return on Equity: Microsoft Corporation 121 Key Takeaways 124 Chapter 7 Have the Discipline to Say No The Fourth Element 125 In Investing, Discipline is Everything 126 Discipline Affects the Price Paid, Which Determines the Value You Get 128 Be Prepared to Look Stupid 132 Don’t Split Hairs 137 Unveiling Investor A: Warren Buffett 139 Discipline is Simple but Rarely Easy 145 Key Takeaways 146 Chapter 8 Practicing the Art of Patience The Fifth Element 147 Swimming against the Current 150 The Benefits of Waiting for a Good Pitch 151 Ignorance Can Be Bliss 158 The Benefits of a Buy-and-Hold Approach 162 Conservative Tests of Safety a Must 171 Key Takeaways 172 Chapter 9 Invest Significantly at the Maximum Point of Pessimism The Sixth Element 173 Putting it All Together 174 Pessimism Leads to Value 179 Avoid That Which is Most Valuable 181 Remain Flexible in the Approach 186 All or Nothing 192 Key Takeaways 193 Chapter 10 More Than One Way to Find Value Case Studies Showing the Approach at Work 195 A Reminder: Process First, Outcome Second 197 Case Study #1: Finding Value in an Unloved Industry Sunrise Senior Living (SRZ) 198 Case Study #2: Money Machine South of the Border Ternium Steel 205 Case Study #3: A Tale of Two Shares Mueller Water Products 214 Fertile Hunting Ground 216 Conclusion 219 Key Takeaways 220 Chapter 11 Avoiding Common Stumbling Blocks 221 Growth and Value: Two Sides of the Same Coin 225 Book Value: More Than Meets the Eye 232 What Matters Most 240 Key Takeaways 242 Chapter 12 Starting an Investment Partnership 243 Two Key Considerations 244 Service Providers 245 Quality Matters Most 247 Notes 249 About the Author 253 Index 255
Subject Areas: Finance & accounting [KF]
