Value Investing Today

Tests for Safety 1. Debt-to-Equity is less than 1 2. Current Assets are twice liabilities 3. Total Debt is less than twice net current assets 4. Annual earnings growth is at least 7 percent over the last ten years 5. No more than two year-to-year earnings declines of more than 5 percent during the last ten years. Four step test for value 1. No losses within the past 5 years 2. Total debt is less than 100 percent of tangible equity 3. Share price is less than book value per share 4. Earnings yield is at least twice the yield on long term 20 year bonds Share Price value 1. If a stock's price was less than two-thirds of net-net current assets per share. Investors buy excess cash for 67 cents on the dollar and get a full claim on the company's permanent assets for free. The company must be generating profits. To calculate intrinsic value investors rigorously examine qualities such as financial strength and earnings strength in context of the companies past results., its current operation, and its future prospects What does price to earnings mean? If a share costs $20 and reports a $3 Earning per Share than P/E equals 6.7. The buyer is paying $6.70 for every $1 of earnings. What is Net Current Assets? Net current assets is the amount of capital a company creates or consumes in a period of time. Net Current Assets = current assets - current liabilities. What are Current Assets? Current assets is the amount of cash and cash equivalents (or inventory, etc that can be converted to cash quickly to pay the bills) and current liabilities are the bills that are due. What is Book Value per Share? Book value per share =par value of an outstanding preferred stock - liabilities / outstanding shares of stock. How do you calculate the Fair Market Value of the Stock? Benjamin Grahams NCAVPS =current assets - total liabilities / shares outstanding

Fairly impressed with the author's ability to make sense of value investing in such lucid manner - always interesting to read someone managing over 50 billions. Think one could summarise the book in about 10 pages but the criteria for stock screen were significant -- don't remember reading them in security analysis but in this book the author emphasised on ignoring the net net (current asset - all liabilities) if the firm is making a loss as cash will be used up very quickly. - How did the author know?? Graham told him in person !!! i always thought it's already hard enough to find companies trading with current asset - all liabilities 33% more than the price per share! more after the fall of Lehman- and the firm has to be making a profit too !!! how many stocks could there be ?? other excellent points include how risk measured with Beta / standard deviation / risk as volatility are not exactly what investors in practice are concerned with ! works for traders but completely pointless for long term value investors- Other interesting discussions include how everyone should invest globally (searching for value stocks) and how to compare different companies given the differences in accounting for financial reports in specific countries - also why index funds aren't necessarily the best way to invest if there are concerns over the construction process of the index and why it's the opposite to value investing if investors are buying the index fund on the rise. should one buy the book?? probably no cos one could finish reading it in few hours but it's still worth reading ! Wish the author explain in greater details esp. about global investing!

On a recent trip to Brandes Investment Management to consider them as a money manager, I was given this book as the founder of the firm wrote it. It attempts to be a current day update of the Benjamin Graham "Value Investing" philosophy but it's really a current day value investing book written in layman's terms.If you believe in value investing or if you want to easily understand the principal, then this is the book for you. It's a very quick read, which can be finished in less than five hours, as it has less than 200 pages.The actual philosophy of value investing and points to look for in a company were brief, concise and very well written. The most valuable part of the book to me was the chapters on value investing overseas where foreign stock exchange results were compared with America. I came away with a better understanding and believe that opportunities for investing overseas would be desirable from a value and diversification standpoint.A good "skim" read on a tough subject that I still recommend to the right audience.

Successful money manager, Charles Brandes, explains in plain language the important lessons taught by Benjamin Graham. He lays out simply how to screen companies for inclusion in an optimal portfolio, how to construct a portfolio, and how the patient investor can achieve extraordinary returns. Importantly, he demystifies foreign investing and builds on Graham's tenets with a thoughtful discourse on international security analysis. He makes an important case for a heavy weighting in non-US equities, and he defends his case for a 100% position in common equities to the exclusion of preferred equities and bonds. "Value Investing Today" is a must-read for the long-term wealth builder.