As of 08/20/2019
  Indus: 25,962 -173.35 -0.7%  
  Trans: 10,006 -75.35 -0.7%  
  Utils: 834 -1.95 -0.2%  
  Nasdaq: 7,949 -54.25 -0.7%  
  S&P 500: 2,901 -23.14 -0.8%  
YTD
 +11.3%  
 +9.1%  
 +17.0%  
 +19.8%  
 +15.7%  
  Targets    Overview: 08/15/2019  
  Up arrow27,200 or 24,900 by 09/01/2019
  Up arrow10,700 or 9,550 by 09/01/2019
  Up arrow850 or 790 by 09/01/2019
  Up arrow8,200 or 7,400 by 09/01/2019
  Up arrow3,000 or 2,750 by 09/01/2019
As of 08/20/2019
  Indus: 25,962 -173.35 -0.7%  
  Trans: 10,006 -75.35 -0.7%  
  Utils: 834 -1.95 -0.2%  
  Nasdaq: 7,949 -54.25 -0.7%  
  S&P 500: 2,901 -23.14 -0.8%  
YTD
 +11.3%  
 +9.1%  
 +17.0%  
 +19.8%  
 +15.7%  
  Targets    Overview: 08/15/2019  
  Up arrow27,200 or 24,900 by 09/01/2019
  Up arrow10,700 or 9,550 by 09/01/2019
  Up arrow850 or 790 by 09/01/2019
  Up arrow8,200 or 7,400 by 09/01/2019
  Up arrow3,000 or 2,750 by 09/01/2019

Bulkowski's Book Review: The Little Book of Value Investing

 

 

The Little Book of Value Investing, by Christopher H. Browne

The Little Book of Value Investing, by Christopher H. Browne, reviewed 3/6/2008 and written by Thomas N. Bulkowski. Copyright (c) 2008 by Thomas N. Bulkowski. All rights reserved.

This is the only book on value investing that I have read that covers or even mentions foreign markets. That may not be saying much because I don't read many financial books and even fewer ones on fundamentals. Browne says that the secret is not to try and mold a foreign country's accounting to our standards but to better understand their methods.

For example, he cites Lindt and Sprungli where he found that assets were being depreciated every 2.6 years, which was unusually short when compared to other candy companies like Nestle. He spends a page discussing the financial shenanigans he does to tweak the numbers, but found "an adjusted P/E ratio of 7.5, which was one of the lowest P/E ratios for a major consumer franchise in the world." He goes on to say that, "I found numerous accounting anomalies of this sort as I researched companies in Europe. Almost uniformly, the odd accounting practices resulted in a company reporting lower earnings and lower asset values than would be the case under U.S. accounting standards." Buying opportunities, in other words.

I am not recommending that you go out and buy foreign stocks on a fundamental basis, but the discussion does make his book unique.

He offers lots of tips, but you have to dig for them. The presentation would be much better if Browne used bullet items to identify important points or even included a summary at chapter end.

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Here is some of what he considers important.

The author suggests looking at the trend of various fundamental data, like the current ratio (steadily declining may indicate liquidity problems), working capital (rising is good), inventory to sales (rising inventory means they can't sell what they make), rising revenue (good), growing net profit margins (good), and so on.

The final chapter of the book, called, "Don't Take My Word for It," reviews a number of studies by independent individuals on how well value investing works over time. They confirm that low P/Es, low price-to-book value for foreign companies, and insider buying are all helpful.

Finally, one study of "falling knives," those stocks that dropped at least 60% over the prior year, found that they were four times as likely to go bankrupt, but outperformed the market during the next 1, 2, and 3 years holding periods. "The larger the market capitalization of the company, the higher the outperformance and the less the chance of corporate failure."

-- Thomas Bulkowski

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See Also

 

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