Category Archive 'Value investing'

Review of The Little Book of Value Investing

Value investing

I still consider myself a newcomer to value investing and am always eager to learn more about it. So when The Little Book of Value Investing came out last month, I decided to take a look.

The Little Book of Value Investing is written by Christopher Browne, of Tweedy, Browne Company, a well-respected, 86-year-old investment firm who counted Benjamin Graham as both a client and mentor several decades ago. As such, Browne is writing this book based on years of experience and hard-earned knowledge.

I think the book can best be described as a nice little reference manual. In it, Browne details both his mindset and philosophy as well as details on the calculations and ratios he uses to evaluate a company or stock. Actually, from what I could tell, all the financial ratios and criteria that Browne uses are identical to those written for the defensive investor in Graham’s . (Here’s a quick summary of Graham’s defensive value investing ratios and criteria.) I would have liked to have seen Browne’s own tweaks to these ratios, if he had any, given that many people believe some of Graham’s criteria are a little out-of-date.

The chapter I found most interesting was entitled “Send Your Stocks to the Mayo Clinic”, in which Browne summarizes the questions he asks before investing in a company. To me, the following questions (taken from the chapter) are great ones because they force investors to consider the company, not just the stock symbol, and really get in the mindset of evaluating what makes a company tick, grow, succeed, all of which which, after all, should be long-term reasons why a company’s stock increases or decreases in value. (I’m only listing the questions, but Browne devotes a few paragraphs to explaining each one.)

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Finance sites and posts I’ve enjoyed recently

Business & entrepreneurship, Value investing

George of Fat Pitch Financials has started a new site called that’s worth a look. Think of it as a value investing version of reddit, where users can contribute posts they’ve enjoyed and have members rank them higher or lower in importance. Right now, he’s giving away a few copies of The Little Book of Value Investing to the highest users in October, and there’s also a way for you to share in ad revenues as well. You can also find a link to the homepage there.

Along the same lines, but a site that’s been around for much longer is , which provides information on the stocks that gurus like Buffett, Soros, and other well-respected fund managers are buying and selling. I’m guessing that the info comes with a time delay and mimicking the pros’ picks won’t be an easy way to make money, but it’s a neat site anyway.

Ramit over at I Will Teach You To Be Rich did a nice . Her story and advice on moving from being a “corporate prisoner” to “thriving entrepreneur” (that’s actually her business, helping people do that) are both inspiring and practical, well worth a read.

Barron’s Challenge: for students and profs

Value investing

For those interested and who qualify, registration for is currently underway.

The challenge lasts 5 months, from October 30, 2006 through March 31, 2007, and there are two divisions: one for students (pretty much anyone doing full- or part-time studies at an accredited junior or four-year college or university or graduate school), and one for professors currently employed at the same criteria. Top prizes are $1500 to the winners in each group, $1000 for those in second-place, and $500 for those in third.

Yours truly doesn’t qualify, but I know of many people who would (including fellow bloggers). If you don’t qualify and would still like to compete in a mock stock-picking challenge, you might want to check out , though because they focus on trading, competitions only last for one week or a month at the longest.

Hopefully, Barron’s will publish standings and winners at the end, because I’d love to see if any winners used a good strategy that I can learn from!

My stock portfolio performance to date

Personal finance, Value investing

Since I started investing on my own (roughly a year and half ago), I’ve been trying to be diligent about keeping track of my transactions and performance. I’ve found that individual investors very seldom know how they’re doing, or even if they’re beating the index. Excel makes this much easier to do, and I created a spreadsheet for this purpose (along with part one and part two instruction guides).

Yesterday, I sat down and assessed how my portfolio performance has been to date. The results are below. The portfolio includes money in a regular brokerage account, and my and my husband’s regular and Roth IRAs. (I didn’t include our 401ks, which are held at Fidelity and invested in four mutual funds among the selection available from our employers.) The portfolio also excludes my cash positions, the bulk of which are currently in soon-to-mature 3-month CDs at 5.41% APY and a money market fund.

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Cash received for Advanced Nutraceuticals (ANII)

Value investing

I received the cash in my account for my 499 shares of ANII in my account yesterday, thus completing . To recap:

Date Action Balance
16 August 06 Bought 499 shares of ANII at 3.46 (1,726.54)
16 August 06 Commission charge on purchase (9.95)
8 September 06 Reverse split occurs
4 October 06 Cash in lieu deposited into account 1,996.00
Net gain +259.51 (14.9%)

The 14.9% received over a period of 50 days of investment is equivalent to 108.8% annualized, if you are accustomed to using this type of figure for comparison. From what I understand, the month it took between the reverse split and receiving the cash was about average for a special situations investment.

It’s interesting that when I initially called Schwab to confirm all the fees, they said the fee amount on a voluntary or involuntary reorganization would vary but would usually be $39. In this case (which would be classified as an involuntary reorganization), I wasn’t charged any fees or commissions for the conversion of the 499 shares into cash. I remember reading in the proxy statement that “[shareholders will] not be required to pay any brokerage commissions or other service charges in connection with the reverse stock split”, so whether Schwab charges a reorg fee might be decided on a case-by-case basis, and in this case, due to this clear stipulation in ANII’s proxy.

I like that with ANII, I didn’t have to do anything additional after I purchased the shares. Overall, this was a very hands-off, easy transaction. Unfortunately, easy gains like this one aren’t always around, but I certainly like the opportunity to have some extra cash via a good value investment whenever possible!