OK, I'm a value sort of guy. I look for bargains when I shop. But getting a bargain doesn't always mean `cheapest.' Cheapest can be a crummy product at a deservedly low price. Value is getting a good product at a fair price, and who among us doesn't want that? If I run my life like that, why not my investments? Well, I'm a `whatever it takes' sort of investor. Not a pro, but experienced and better than average. And, as I look back over my own investing, the one investment style that has outperformed all others is 'value.'
In the parlance of investing, as Chris Browne explains, value investing is buying good stocks not only at a fair price, but at bargain-basement prices. In "The Little Book" he shows us how to do it. If you're an experienced investor, the first few chapters may drag a bit as Browne lays the foundation, outlining the virtues of value investing and explaining how to determine a company's worth using common and not-so-common indicators. He also tells us how value stocks come to be `values' and when to invest in `value.' But this is good stuff and an important precursor to showing us how to uncover prospective value stocks, which he gets right into in chapters Six through Ten. Along with these, chapters Eleven through Fourteen are the meat of the book. Here we learn how to determine which of our suspects are truly values that are likely to make us money, the winners, and which of them are deservedly cheap, the losers, and are going to stay that way.
In the remainder of the book, Browne continues making a case for value investing, adding related conventional and not-so-conventional market wisdom, and contrasting value with other investing styles. Chapter Seventeen is entitled "It's a Marathon, Not a Sprint" and is subtitled "It's time in the market, not market timing, that counts." Indeed, that's what this is all about. Value investing is buy-and-hold with a twist. You buy historically good companies when the price is low relative to what the company is worth and hold until the price appreciates to nearer its true value. This can take some guts, but there is virtually nothing in the world of investments that will reap greater rewards over the long haul. Browne points out that value investing is also one of the better ways to hedge your bets, smoothing out the rough spots and market corrections, and he backs those claims up with real world numbers.
I really like this book and wish it had been written twenty years ago. But, I will warn you that this is not another one of those I-made-money-in-the-market-you-can-too books, written by someone who no longer trades, instead making a fortune doing nothing but hyping and selling get-rich-quick schemes. Nor is Browne one of those guys who rolls up his sleeves and screams into the TV camera. He is a practitioner. Better yet, he is a practitioner with a stellar thirty-five year track record in value investing. Even so, he's humble, a quality that makes his work here accessible. Browne learned from his father, who along with the current champ of value investing, Warren Buffett, learned from the father of value investing, Ben Graham. He says if he can do it, so can we and he tells us how in a succinct, friendly and straightforward manner.
For most, "The Little Book" is a quick 2-3 hour read. But Browne tells us this is not the quick way to riches. Value investing, he says, doesn't take a lot of brain power or specialized skill. Rather, it takes work and patience. Browne does not promise that if you buy and read "The Little Book of Value Investing," you'll begin seeing dividend checks in the mail the next and every day. What he does do, though, is give the average investor solid advice and sensible techniques for going about the task of amassing wealth through value investing. And, he does all that for a mere $20. Now, that's value.