This book is based from the information received in interviews between the author and five well known money managers: Bill Nygren, Andy Stephens, Christopher Davis, Bill Fries, and John Calamos. Discussing investment principles and valuation methods, the author has come up with five key points that each of the five money manager follows. The concepts such as intrinsic value and developing a valuation model are discussed in detail.
Basic finance principles such as the time value of money, dividend discount model and Internal Rate of Return (IRR) are also discussed with examples. Examples are used to explain how to use these tools in real life such as analysis of a situation when Home Depot’s stock provided a significant opportunity to profit. The process of screening stocks to match certain criteria is explained in great detail.
What I gained from reading this book:
This book was fantastic to read as it gave very clear analysis of the methods used by money managers and how to put together your own investment system. The principles are very clearly explained (better than many of my finance lecturers did) and very useful. The concept of valuation is extremely important but many people neglect to learn about it (think of all the investors at the peak of the dot-com bubble).
The chapters are very clear and well explained. I gained a lot from the step by step explanations and examples. This book taught me how to compute IRR better than my second year finance lecturer did. This book not only gave me valuable information that I can use with my own investments, but it also made my finance studies a lot easier. Although I don’t plan on investing in a way that is explained in this book, knowing the principles and how to correctly apply them is extremely valuable. I think anybody who is interested in investing can gain from this book as I have.
Very clear examples and explanations. The information provided can be very useful in deciding whether other investments are worthwhile or not.
Detailed explanation on creating your own investment strategy and what should be included. Explains how by using a simplified strategy. Very easy to learn thanks to the author’s clarity.
Although the concept of valuation is simple, it is quite hard to come up with reliable valuations for companies in real life. This isn’t a negative for the book because the author explains the problem. I am just making this clear for those who may think it is easy to apply what it taught. I don’t really have any negatives for this book. Well, I wish it was longer. But there are plenty of other books to add to this information.
Recommended for: People interested in investments
I recommend this book for people who are serious about investing on their own. I gained more from this book than quite a few finance units I took at university. The small price tag of this book compared to the high cost of university fees makes this book priceless. The concepts were explained better in the book compared to my university lecturers.
By understanding what is needed to create your own investment strategy, you are more likely to succeed. In other words, if you don’t know what this book is teaching, you are at a disadvantage.
Overall rating: 8 out of 10 stars
Australians can buy the book by clicking the picture below: