Corporate Valuation for Portfolio Investment

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Corporate Valuation for Portfolio Investment: Analyzing Assets, Earnings, Cash Flow, Stock Price, Governance, and Special Situations (2010, Bloomberg Press), is an ambitious effort by coauthors Robert A.G. Monks, a renowned shareholder rights activist, and Alexandra Reed Lajoux, an M&A expert. They cover a lot of ground in around 540 pages, and state at the end of Chapter 1 that the book is intended primarily for institutional investors, adding that they would be honored if professors recommend their book along side other classics such as Security Analysis (review).

The book favors breadth over depth in many instances, but is rich in footnotes for further research. Students of finance and practitioners will find Corporate Valuation for Portfolio Investment a great book to read reference, while individual investors with no formal background in finance will in fact have much to gain from the chapters on financial statements, valuation methods, and the coauthors’ “philosophical framework” for valuation. Continue reading

Martin Whitman’s approach to value investing

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I recently finished reading Martin Whitman’s, “Value Investing: A Balanced Approach” (1999). Don’t let the date of publication fool you into thinking his approach is dated. In his interviews over the past few years one hears the same terms and mindset as described in the book. Whitman’s firm, Third Avenue Management, is recognized for its track record in value and distress investing; the latter has led Whitman to be regarded as a “vulture” investor, which is apparently something he doesn’t mind, especially considering all of his success. Value Investing will probably not be a fun read for casual or passive investors (“OPMIs” according to Whitman; more on that later) and it certainly won’t be for traders who would have a hard time finding current assets on the balance sheet. However, for those devoted to value investing (thinking at times like control investors), this book is among the best. Continue reading

Benjamin Graham’s rediscovered 1946 lectures

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Having recently re-read and reviewed Security Analysis (4th ed. pub. 1962), I was pleased to come across Wiley’s web publication of the so-called “Rediscovered Benjamin Graham” lectures from 1946.* Full of nuggets of wisdom these lectures, the tenth and final was particularly gratifying. To each investor or intelligent speculator, his or her own takeaways from Graham & Dodd and said lectures, the latter from which I’d like to call to attention two items in this post (1) index investing and (2) Graham’s parting observations on the conduct of business on Wall Street. Continue reading

Dusting off a classic: book review of Security Analysis

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Inscription in beginning of book: “Many shall be restored that now are fallen and many
Shall fall that now are in honor.” — HORACE. Ars Poetica.

In the fourth edition of their investing classic, Security Analysis: Principles and Technique (pub. 1962; prev. ‘34, ‘40, ‘51), Graham & Dodd (and newly joined co-author, Sidney Cottle) faced an environment in which their conservative approaches to common stock investment left them with increasingly fewer opportunities due to the 1950s bull market. They acknowledged their dilemma, which is one value investors will face time and again: stick to your bread-and-butter, “old and highly conservative standards” and risk both the charge of “old-fogyism,” and the possibility of missing important changes to the underlying structure of common stock values; or embrace the general optimism and the long-term expectations of growth, which are used to justify market levels, and risk repeating the practices, and probably the errors, of bull markets past. Continue reading

Book Review: Trade Myths

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Enzio von Pfeil, the author of Trade Myths: Globalization has left trade balances behind, is a Hong Kong-based investment advisor and he also manages his own family of funds using his Economic Clock. He is a regular contributor to Bloomberg TV and CNBC Asia. Enzio earned his Ph.D. in economics at the University of Freiburg in Germany (he studied under renowned “Austrian School” economist Friedrich von Hayek), and subsequently went into banking and garnered invaluable experience in Treasuries, currencies, and macro strategies. He later served as chief regional economist for leading London-based i-banks in Hong Kong.

As someone who has followed Enzio’s work for the past several years, I can confidently say that Trade Myths is as iconoclastic as he intended it to be and with sound reason, not to mention its critical timeliness. While Trade Myths should be required reading for everyone in government (especially in the U.S.), it is also a must-read for those in the capital markets, and it is also readily accessible, and highly suggested to, everyone in the workforce. Trade Myths weighs in at a concise 75 pages, with ten pages of charts that clearly illustrate his trade myth-busting. Below I provide a synopsis of the book and conclude with some Q&A I just had with Enzio. Before starting, I want to thank Enzio for publishing Trade Myths, which has served as a real eye opener, particularly in terms of what headline trade figures mean (or that is, what they miss), how much foreigners are really financing America, and for the various scenarios provided of what could happen if trade goes wrong. Continue reading