Books on Investing
Value investing by Bruce C. N. Greenwald
Of all the books on investing, Greenwald's book on Value Investing is an important read for stock investors as it provides an extensive summary of this approach to investing.
The book explains the innovations in the field as practised by some of the most successful investors.
Greenwald looks at the discipline with the critical eye of an academic, making it more informative than many other books about the subject.
The book ranks highly in my estimation and should be required reading for the discerning investor seeking information on stock investment.
The valuation methods based on net asset value (NAV) and earnings power value (EPV) were important aspects of the book from my perspective.
The book lays out a structured way to value a company by first looking at reproduction costs of assets, then earnings power, and finally the value of profitable growth.
The authors suggest that value investors are skeptical about growth for two reasons. One reason is that it is so hard to predict, but more important, quite often growth is not worth much.
|"Unless the return on capital (ROC) of the company is higher than the cost of capital, growth does not create value"|
The book provides other ways in which to examine a potential investment and find undervalued companies besides running a discount cash flow analysis (DCF).
Greenwald also spends time discussing problems with discount cash flow analysis (DCF) as well as franchises. His thoughts on these subjects are thought-provoking.
Greenwald concedes that his preferred methodologies require, in some instances, in-depth knowledge of the business and industry of the company being examined.
The book also summarizes The Intelligent Investor, Security Analysis and more recent books on Warren Buffett, the value investing guru.
The second half of the book consists of eight investor profiles.
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