Yong-Long Lai

Investing For Beginners

Posts Tagged ‘Value Investing’

Security Analysis – Benjamin Graham

February 27th, 2009

Yong-Long Lai

As you might have figured out, I’ve been doing a lot of reading on Benjamin Graham and many of his material… I just found out that the book “Security Analysis – Benjamin Graham and David Dodd” actually made an appearance in the film, “The Pursuit of Happyness”

“The 5th edition of Security Analysis made an appearance in the film, The Pursuit of Happyness. The film prominently showed the 5th edition of Security Analysis — black jacket, white, gold, red fonts — as the one that Dean Witter Reynolds required 60 unpaid interns to study for six months. The intern portion of the story is circa 1981; the 5th edition of Security Analysis was published in 1988; therefore, the film production prop department used the wrong edition.” – wikipedia

Anyways, I thought it was quite interesting that it was show-cased in the movie…

Security Analysis – Benjamin Graham is actually a very comprehensive book, it’s pretty much all the details of The Intelligent Investor. I think it’ll be one of the next book I’ll be reading (depending on whether I feel like getting into the details etc). If you’re thinking of picking up this book, make sure you get the 6th Edition (publish in 2008) because it has all the new commentary which is more relevant to our current economy etc.

Posted in Value Investing

Tags: Security Analysis, Value Investing

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The Intelligent Investor – Why You Will Want to Read It

February 25th, 2009

Yong-Long Lai

If you’re looking for a local copy (Perth, Australia) of The Intelligent Investor, you might want to try Boffin in the City. You can pick it up for $45 which is cheaper than all the other bookstores within walking distance to the CBD (that I checked).

Anyways, a few people has asked me, “why are you reading this book?. The answer to this is very simple… I was reading some old blog post from the Four Hour Work Week and I came across one particular post where Timothy Ferriss raced for the opportunity to ask Warren Buffet a question at the Berkshire Hathaway Annual General Meeting (AGM). Anyways the long story short, one of the many questions that was asked in that particular AGM was:

Q:What’s the best books to read for investing and life?
—

A1: (Buffet) Chapters 8 and 20 in The Intelligent Investor.

A2: (Munger) Anything by Ben Franklin.

I don’t know about you, apart from my ’studying’ days, nobody has ever recommended reading two chapters out of any book to me. Most people just recommend a book, but Warren Buffet is not anybody and he was deliberately specific (in my opinion). I Figured if Warren Buffet spent that extra second to point out two chapters out of a single book, I should at least make the effort to go read the two Chapters.

Anyways, for anybody who is curious about what’s Chapter 8 and Chapter 20 I better put you out of your misery.

Chapter 8: The Investor and Market Fluctuation
Chapter 20: “Margin of Safety” as the Central Concept of Investment

Posted in Value Investing

Tags: The Intelligent Investor, Value Investing, Warren Buffet

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Standard and Poor’s 500 – Price to Book Ratio

February 23rd, 2009

Yong-Long Lai

I’ve been doing research into value investing – ie. buying stuff below book value (it’s not exactly as clear cut as, if Price < Equity then buy).
Things you’ll want to consider are:

Non-Current Assets – plant and equipment (how much are they really worth??)
Are there Long term debt? heavily leverage companies are not good (especially if it takes many years to repay the debt from their net income)

Anyways, I’ve attached a diagram of the Standard and Poor’s 500 – Price to Book Ratio. We can see that in the 1980s, the Standard and Poor’s 500 index was trading at around book value. That is usually the point where great wealth is accumulated (e.g. Warren Buffet)

standard & Poor 500 Price on Book Ratio

If you’re looking at how to find below book value stock, check out the Stock Screener I was trying out in my other post – The Intelligent Investor: Looking for Below Book Value … It’s just something I was experimenting with and I’ll refine it when I find better techniques. I think one of the better stock screener to use is the one on Money Central. If you’re on a Mac like me, don’t bother trying, it won’t work. I even tried downloading IE 5.23 for Mac (But the toolbox is only compatible for IE6 and above and Microsoft stopped support IE for Mac.

Posted in Value Investing

Tags: Standard and Poor, Value Investing, Warren Buffet

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The Intelligent Investor: Looking for Below Book Value

February 21st, 2009

Yong-Long Lai

Book doing a bit of research on Under Valued Stock – Picked up a book called, “The Intelligent Investor” – Benjamin Graham. Benjamin Graham is Warren Buffet’s mentor and Warren Buffet has quoted “The Intelligent Investor” several time. (Warren has highlighted Chapter 8 and Chapter 20, which is “The Investor and Market Fluctuations” and “Margin of Safety”, respectively.

Anyways, I was doing a bit of playing on Google Stock Screener and here’s a screener I made to filter out profitable undervalue stocks (note: you have to look for the ones which book value/share greater than last price of share)

If you’re looking for the book check this out, It’s selling for $50 in the book store, if you buy it from an Australian online store it’ll cost $40 but you have to pay $6-7 in shipping. If you can wait, I think the value is to buy it online and get it shipped (even though its in USD) – current exchange rate is about 0.65 (ends up being less than $40