The Little Book of Value Investing by Christopher H. Browne, Roger Lowenstein see larger photo List Price: $19.95 Our Price: $13.57 Released 22 September, 2006 Hardcover Availability: Usually ships in 24 hours

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Customer Review
Little Book - Lot of Credibility
4/5 Stars
In a perfect world markets would offer stocks at prices equaling their value, but they are not and do not. Value investors look for companies that are trading for less than their intrinsic worth. Stocks trading at low p/e ratios, low price-to-book values, or for less than their 'take out' price can be value candidates. Many of these stock prices represent temporary mis-pricings, and that is the point. Patience is a strategy that rewards the value investor as prices eventually adjust upwards to reflect their true worth.

Most investors looking for outsized gains focus on companies whose prospects are grand but also widely recognized. Growth investors and momentum investors are inclined to push prices well beyond a company's underlying value and ignore the importance of consistent, if not explosive, growth, and its appreciating assets. It is instructive that the author begins his review of a company by examining its balance sheet for what it is currently worth. By contrast growth investors will focus on a company's income statement for what it may become in the future.

Finding a "margin of safety" gives the value investor the confidence to weather the times when his style of investing is out of favor. That margin of safety is foremost in being able to buy solid companies on sale. Owning a diverse portfolio of easily understood businesses with predictable income and a pattern of insider buying or corporate stock buybacks re-enforces that margin of safety (I would also add-in companies that consistently increase their dividends). Identifying suitable value stocks means avoiding cheap stocks of companies that are over-leveraged, facing increased competition, dealing with unfunded pensions, obsolescence or accounting issues. These are the value traps that add nothing to your portfolio prospects.

Many of these ideas we have heard before. Browne's accomplishment is to present them in an accessible way. His long tenure as a career investor and money manager and his specific anecdotes got a long way in maintaining his credibility as an advocate of this investing style. Academic studies that support the value approach are noted in the final chapter and bibliography. This is a short, easily read, and informative introduction to the topic.

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