A Value Stock Investing Book

An intelligent investor's guide to investing in the stock market


This value stock investing book titled Value: The Intelligent Investor's Guide to finding hidden gems on the stock market by James Carlisle provides readers with an easy to read account of what value investing is, and how you can use it to your advantage.


The main aspects that the book covers include ...
  • how to decide what type of investor you are
  • why value investing works
  • how to evaluate company accounts
  • how to recognize a quality company
  • how to build a diversified portfolio
  • when it is time to sell a stock.

While the book uses Australian listed company examples, this does not detract from the message that the author is providing.


Valuable Insights

What were the aspects of the book that I found most useful?

I would have to say that it was the discussion on the use of free cash flow yield as a valuation measure.

I also found the discussion of what makes for a resilient company useful. While it is one thing to be able to value a company at any moment in time (an inexact science), it counts for little if the company cannot sustain itself into the future.

The author outlines aspects of a quality company that reflect not so much what the company can provide, but what the customer wants. These aspects about a company include ...

  • is it a product that people want, that adds value to their lives, that is worth the price paid and has people coming back for more?
  • are there many companies competing in the area with the potential for competition on price alone?
  • are there barriers to entry for competitors and barriers to exit for customers?
  • how much bargaining power do customers and suppliers have?
  • is the management and corporate culture right?

To Conclude

Interestingly, the author summarizes this value stock investing book by providing 'three little rules'.

You should buy a stock when ...

  • it is within your 'circle of confidence' so you are able to make confident assessments of the next two rules
  • the purchase makes your overall portfolio more undervalued; and
  • the purchase maintains an acceptable portfolio balance.


He sees the process of selling as the opposite of these three rules in that you have lost confidence in the stock's undervaluation (you now think that it is now overvalued) and you are selling to restore the portfolio balance.

This book is a good read for anyone interested in value investing as it provides the nuts and bolts about the topic.



Related Article:

Portfolio re-balancing: An important technique to lock in gains and protect from market downturns. Worth a look?




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