Wisdom on Value Investing E-Book

Gabriel Wisdom

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 304

Veröffentlichungsjahr: 2009

Beschreibung

Wisdom on Value Investing offers author Gabriel Wisdom's insights on succeeding in difficult markets. One of his favorite approaches-which is part classic value investing and part behavioral finance-is called "The Fallen Angels Investment Strategy," and it prepares investors to look past short-term value assumptions in order to capture profits. Throughout this book, Wisdom will show you how to capitalize on value plays where the fundamentals are actually strong, but the "general wisdom" surrounding the security has turned negative. He discusses how stocks with the most promise are ones that Wall Street has marked down without regard to their underlying value, and reveals how this type of intrinsic value discount provides a margin of safety during difficult times, and substantial upside rewards for those who find them early enough. * Takes value investing one step further by mixing significant amounts of behavioral finance into the analysis * Prepares investors to take advantage of other's mistakes * A time-tested strategy for any type of market-up or down A classic look at value investing with a twist, this book will put you in a better position to succeed in both bull and bear markets. Includes a Foreword by Mary Buffett and David Clark, authors of Buffettology.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Foreword

Preface

Acknowledgements

CHAPTER 1 - Ten Traits of the World’s Greatest Bargain Hunters

Trait #1: Buy When Everyone Is Complaining, and Sell When They Are Celebrating

Trait #2: Have a Methodology to Weigh the Value of Your Holdings

Trait #3: Stick to Your Methodology When Times Are Tough

Trait #4: Have an Exit Strategy

Trait #5: Be Properly Diversified, Not Overly Diversified

Trait #6: Live with Volatility without Changing Your Investment Strategy

Trait #7: Recognize That Volatility Is Not the Same as Risk

Trait #8: Learn from Your Mistakes

Trait #9: Understand Risk

Trait #10: Program Yourself to Take Advantage of Opportunity Quickly

CHAPTER 2 - Fallen, Not Falling (An Important Distinction)

Stockholders Are Business Owners

The Three Forces That Create Fallen Angels

Watch for Extreme Prices

No Better Time Exists for Bargain Hunters

Separate the Fallen from the Falling

Study Past Performance to Estimate Future Potential

Investment Methodology

The Market “We” Knows More than the “I” of Individuals

Marketplace Gossip

Avoid Fallen Companies and True Believers

The Contrarian Stance

CHAPTER 3 - Great Moments in Bottom Fishing: The Fallen Angels Hall of Fame

A Mickey Mouse Company with Goofy Accounting

A Bunch of Yahoos

Jack Ends up in a Pickle

More Fallen Angels

A Second (and Third) Bite at the Apple

Fallen Angels: Risk and Reward

CHAPTER 4 - Buy CATS (Cheap and Timely Securities), Avoid Dogs

Who Let the Dogs Out?

Staying Ahead of the Baying Hounds

Financial Engineering

Worst to First

Spectacular Flameouts

CATS versus Dogs

Minimizing Profits and Maximizing Returns

Dewdney’s Law of Zero Return

Mathematics of Loss

Dow Underdogs versus Mr. Market

Timing Is Everything

Stocks around the Clock

Investors Can’t Avoid All Risk

Mark Twain’s Frog

CHAPTER 5 - Cycles and Wall Street’s Wheel of Fortune

Cycles in Nature and Business

Understanding Risk

Perception Equals Value

Do the Wave: What You Can Learn about Investing from Surfing

Capitalizing on Market Trends

Cycles and More Cycles

The Presidential Election Cycle

Pop Goes the Housing Bubble!

Cycles Matter

Sky’s the Limit

The Skyscraper Index

Don’t Bet the Ranch

CHAPTER 6 - Who Wants to Be a Billionaire?

Let’s Play Hardball

Question the Conventional Wisdom

The Ideas that Changed Retailing Forever

Cashing in on Someone Else’s Innovation

Two Gold Rushes, One Result

Keeping the Barbarians at Bay

The Operator of Omaha

Don’t Buy Low—Buy Very, Very Low

Compound Interest—A Billionaire’s Best Friend

Billionaires and Luck—Luck is for Losers

CHAPTER 7 - Time Arbitrage, the Rational Investor’s Ally

Market, Schmarket!

The Tortoise and the Hare: Short-Termism versus Patient Investing

Fallen Angels: Fallen Because They’re Down; Angels Because They’re Rising

The Three-Year Mind Set

The Power of Compounding

Determining Book Value

Return on Equity—A Crucial Factor

CHAPTER 8 - The Pilot’s Checklist for Safe and Effective Investing

Pilot’s Checklist for Successful Investing

Managing Risk

Advice and the Investment Pro

The Fallacy of Owning the Market

CHAPTER 9 - The Science of Demographics: A Glimpse into the Future

The Aging of the U.S. Population

The Dent Forecasting Model

Investment and Aging

Growth Investments

Income Investments

Japan’s Economic Meltdown

Demographics: A Forecasting Tool?

CHAPTER 10 - How to Pick Stocks: The Fallen Angels Formula

Screen One: Business Quality

Screen Two: Paying the Right Price

Is It Time To Buy?

General Dynamics—A Case Study

Portfolio Management

Do Try This at Home

CHAPTER 11 - Profit from Panic, Corrections, and Volatility

The Jungle and the Stock Market

The Forces that Create Fallen Angels

Adoption Cycles and the Crowd

Pros Panic, Too!

Recoverable Calamities and Other Opportunities

Gorillas in the Mist

The 12 Most Common Opportunities for Investors

CHAPTER 12 - The Little Chapter that Makes You a Better Investor

Predictions Can Prove Perilous

Too Little, Too Late

An Inconvenient Portfolio

Beware the Undiscovered Planet Bogus

Expect the Unexpected

The Fat Pitch

Get Paid while You Wait

CHAPTER 13 - Will You Know When to Sell?

Don’t Get Overly Pessimistic

No Downturn Lasts Forever

Make Bad News Your New Best Friend

Market Crashes

When to Sell

The Three Signals to Sell

CHAPTER 14 - Real Estate: The Other Fallen Angel Opportunity

Single-Family Homes at Half Price

How and Where to Find Abandoned Property

Value versus Momentum

Newton’s Laws of Motion

CHAPTER 15 - Ten Fallen Angels for the Next Five Years

Five Blue Chip Fallen Angels

Five Smaller Company Fallen Angels

CHAPTER 16 - Stocks and Bonds and Rock and Roll: My Story

Appendix - RECOMMENDED BOOKS, WEB SITES, AND HELPFUL SOURCES

About the Authors

Index

Copyright © 2009 by Gabriel Wisdom. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Wisdom, Gabriel, 1950-

Wisdom on value investing : how to profit on fallen angels / Gabriel Wisdom.

p. cm.

Includes index.

eISBN : 978-0-470-53088-7

1. Investments. 2. Stocks. 3. Speculation. I. Title. HG4521.W.63’2—dc22

2009010822

To every investor who deserves to prosper

Foreword

My respect for the work and integrity of Gabriel Wisdom is immense. In a world where the term “investing” is often used to mask what amounts to dice throwing, Gabriel is the real thing: a value investor who has the intelligence and foresight to confront that world of fear we call a recession and make educated investment decisions that can pay off handsomely over time. He calls these opportunities “Fallen Angels,” and in his new book, Wisdom on Value Investing, he shares with us the insights he has gleaned from years of successful bear market investing.

I’m Mary Buffett. During my tenure in the Buffett family, I was very fortunate to have known many great value investors. One of them, whom I met at Warren’s home in Omaha, was a brilliant young analyst by the name of David Clark. I’ve had the good fortune of working with David to co-author the worldwide bestselling investment books Buffettology, The Tao of Warren Buffett, Warren Buffett and Interpretation of Financial Statements, and Warren Buffett’s Management Secrets. Our books are all about the investment and management methods of Warren Buffett, a man many in the world consider the greatest investor of our time. The books have now been translated into more than eighteen languages around the globe.

Gabriel has written very well on the subject of value investing—so well that Wisdom on Value Investing has found a permanent place on my bookshelf, next to my four editions of Graham’s Security Analysis and the last thirty years of Berkshire Hathaway annual reports.

So, with great pleasure, please let me recommend to you Gabriel Wisdom’s new book Wisdom on Value Investing. As they say in Omaha, it’s a keeper.

MARY BUFFETT

Gabriel Wisdom understands the true essence of value investing, not only in the terms of the originator of the concept, Benjamin Graham, but also in the language of its most successful practitioner, Warren Buffett. I have spent many hours talking to Gabriel over the years. He has a unique perspective honed through years of practice, which he graciously shares with us in his new book, Wisdom on Value Investing. These essential investing skills can be learned, if you’re willing to change the way you think about risk, complacency, and fear. Gabriel’s unique perspective enabled him to recognize the lurking danger of subprime mortgages and gave him the foresight to stay away from Fannie Mae and Freddie Mac when more notable players in the value game naïvely succumbed to temptation and had their heads handed to them.

It is not surprising that Gabriel finally put pen to paper, as he has many wonderful observations about how to make money using a “value approach.” What is surprising is that Wisdom on Value Investing is written in a language that is understandable to even the beginning investor, yet I, too, find it a worthy and timely read, as I wade through the great many opportunities that Wall Street has now laid at our feet. For the average investor who lacks formal training in securities analysis, Wisdom on Value Investing offers a far more accessible and usable model to practice value investing than, say, the thousand-page tomes of Benjamin Graham.

Without hesitation, I recommend Gabriel’s book Wisdom on Value Investing to both beginner and professional investors alike. I can’t think of a better book to have at your side for making money in these turbulent times.

DAVID CLARK

Preface

The herd mentality works for animals by providing protection, efficiency and even companionship. Humans form herds, too—we flock to popular movies, buy whatever’s in fashion, and live on top of each other in big cities.

Investing in the stock market is one place, though, where it pays to be a lone wolf. If you turn on the TV or pick up a newspaper during times of market turbulence you can watch investors act like lemmings marching to the sea. They buy or sell in unison, almost as if they were hypnotized. Unfortunately, they are also setting themselves up for failure, which in the stock market translates into losing money.

In Wisdom on Value Investing: How to Profit on Fallen Angels, I will lay out a different kind of vision for investing in the stock market, or any other market. My vision promises to put the reader on a unique path to success, far from the anguished cries of the investing masses. This book makes the argument that, rather than following fashion, the smart investor stays calm and waits patiently for the incredible deals that are certain to come along.