How To Think Like Benjamin Graham and Invest Like Warren Buffett 1st Edition by Lawrence A. Cunningham (PDF)

Description

How to Think Like Benjamin Graham and Invest Like Warren Buffett wraps a lifetime of investing wisdom into one highly accessible package. An intelligent guide to analyzing and valuing investment targets, it tells investors what questions to ask, what answers to expect, and how to approach any stock as a skeptical, common-sense business analyst.Above all, this fast-paced book provides investors with the tools they need to thoroughly value any business in which they might invest. A common-sense approach to investing, this book discusses:Three things investors must get from a financial statement Valuation examples from today’s top companies including GE, Amazon, Microsoft, and Disney Why prices deviate from actual values

User’s Reviews

Reviews from Amazon users which were colected at the time this book was published on the website:

⭐[…]Great investments tenets survive the test of time, so last week I revisited Lawrence Cunningham’s How to Think Like Benjamin Graham and Invest Like Warren Buffett. First published in 2001, the book became somewhat of a classic, distilling the collected wisdom of those two giants of investing.The book remains largely relevant, and its lessons still resonate with value investors today:* Use your common sense* “Stick to your knitting,” i.e., invest in companies you know and can understand* Price and value are two different things. The market tells you price, not value* Savvy investing requires determination and hard work to understand the true value of a company. Mr. Cunningham calls Messrs. Buffett and Graham “the consummate homework devotees.”* A company can massage the numbers to make them look better than reality, hence a smart investor needs to understand the business well and examine the numbers over the long term* Get a “thick margin of safety between the price paid and the value one could reasonably expect to get”* Patience matters a great deal – better to stay on the sidelines when you don’t see good investment opportunities than buy a stock just to be in the actionGiven the work of Chiefist. I was especially interested to see what Mr. Cunningham said about the role of managers in investing. He dedicates Part III (of three) to that topic, and yet his extensive treatment fails to satisfy. Indeed, he notes, “[a] fog still clouds the view of managerial ability and trustworthiness.”Early on, he states, “the focus on managers is a focus on trustworthiness.” He notes Messrs. Buffett’s and Graham’s approach to managers. Mr. Buffett suggests investing only in companies run by people you “like, trust, and admire.” Mr. Graham thought investors could not really know management quality well, except as revealed through the company’s financial results. Of course, most investors do not have Mr. Buffett’s access to executives, so they may find it difficult to determine whether they like, trust and admire the executive.Mr. Cunningham suggests starting with the CEO’s letter to shareholders in the annual report to determine trustworthiness. In the 10 years since the book was published, CEOs have sought additional ways to connect with audiences: the advent of 24-hour business news channels, blogs and well-publicized event speeches most prominently. Surely these avenues do afford a way for an investor to assess an executive, but they remain limited. Few CEOs publish blog posts unedited by the marketing, communications and legal departments, for instance. (And no letter to shareholders escapes this rigorous scrutiny and sanitizing process.)Mr. Cunningham on the surface seems to suggest that trustworthiness serves as a proxy for ability and shareholder perspective. In fact, those attributes are quite distinct and different. He would have immeasurably strengthened his argument by noting the distinction and urging investors to seek out managers who possess all three.The book does contain useful questions to ask about board performance and composition. Mr. Cunningham adheres to Mr. Buffett’s distrust of diversity for diversity’s sake on corporate boards. Indeed, inclusion on a board for any reason than ability strikes both as sheer folly. The implosion at some of America’s formerly great companies in the past three years should reinforce this message. Perhaps it isn’t enough; many of those companies had plenty of board members with industry experience and a track record of success behind them. Mr. Cunningham echoes Mr. Buffett when he notes that boards must fairly, but rigorously, evaluate the CEO’s performance, outside the presence of the CEO. We wonder how often that happened at those failed firms, and how many boards performa that evaluation today. Too few, we fear.The low point in the discussion of management comes in the chapter “The Fireside CEO.” Mr. Cunningham examines the records of Jack Welch at GE, Michael Eisner at Disney and the late Robert Goizueta of Coca-Cola. With the exception of his treatment of Mr. Eisner, whose pay he questions, his treatment borders on fawning. Unfortunately, he also picked three extremely well-known CEOs, and therefore doesn’t add much to an investor’s toolkit in term of evaluating executives.However, maybe his inability to advise investors in their appraisals of executives speaks more to the technological limitations of the early part of the century. Today, as noted above, CEOs try to connect with investors and the public in new ways. Much more data are available on individuals.We hope Chiefist comes to play a significant role in your evaluation of executives, too. We seek to give investors an quantitative appraisal of executive quality, and a qualitative look at these leaders as people When you are making a huge investment – maybe in the thousands of dollars for an individual or millions for an institution – manager quality matters a great deal. Use Chiefist’s products and services to help assess your executives’ trustworthiness, ability and shareholder perspective.

⭐Although the definitive popular book on Benjamin Graham and Warren Buffett remains to be written, this excellent work is certainly the state-of-the-art in this area. For those who do not have the time or inclination to read the writings and speeches of these important investment thinkers, you get the key kernels of wisdom in action-oriented doses here. This is the first book I have read that gives the stock investor who wants to outperform the market averages a sense of what is involved in order to have a chance. The examples of how to apply these methods to companies like General Electric, Coca-Cola, Microsoft, and internet retailers are very helpful. I thought this book was much more valuable in every way than Buffettology.Both Graham and Buffett see buying stock as being the same as buying a whole company. The analytical methods involved are similar to those used by companies thinking about making an acquisition, except there is no need to consider what the joint operating benefits of the companies will be. The strength of this approach to stock investing is that if stock values for a company fall too low another company or group of cash-flow-oriented investors will acquire the whole company. In the long run, stocks should not fall too far below their intrinsic value (a Graham concept) as cash flow generators.The book is organized into three sections. The first looks at whether the stock market is efficient or not. If it is, you cannot beat it. If it is not, you can beat it by investing where it is not efficient. The evidence here summarized estimates that the stock market is at least 20 percent inefficient and becoming more so. I am aware of a number of studies showing other kinds of inefficiency that Professor Cunningham does not cite. My own personal view is that the stock market is not very efficient at all, but is relatively predictable within a band of probability.A particular strength of this section is in creating a summary of many of the arguments for stock market efficiency and inefficiency. Trust me. Unless you really love reading this kind of research (which I happen to), you will be better off reading the summaries here rather than the originals.The second section discusses how to outperform the stock market. The best part of this section is an extremely well done parable about a man who wants to sell his apple tree. He is approached by many different types of potential purchasers, and they offer wildly varying prices. You get the interior logic of how each price is arrived at in a way that allows you to see the fundamental weaknesses and strengths of each approach. Nicely done!The heart of this section emphasizes the familiar Graham and/or Buffett (their philosophies do not coincide, but rather partially overlap) concepts of sticking to what you know well, having a margin of safety, and doing your homework. I particularly liked the detailed description of how to determine where you have a knowledge edge that allows you to potentially have an advantage as a stock investor. The cautions against overestimating what you know are very well done.The third section looks at the role of company management and boards of directors. It debunks a lot of the popular thinking about the importance of good governance. As Warren Buffett often emphasizes in his annual letters to shareholders, you should invest only with people you “like, trust, and admire.” A CEO with a weakness (particularly a lack of integrity) can quickly tank your investment before you can do anything about it. Certainly, I have been sorry a number of times when I have not followed that rule. I certainly subscribe to it now. Every management will make mistakes. Only highly focused and capable ones will notice that they have and work on rectifying the errors rather than trying to explain why there really is no problem.If you read this book carefully, it will convince you that outperforming the stock market is a pretty hard thing to do unless you have a great deal of knowledge about public companies and unusually good access to company managements. I think describing what needs to be done is the most eloquent argument that I have seen for why the average investor should be in indexed mutual funds for the stock portion of her or his portfolio. I suggest you already read John Bogle’s Common Sense on Mutual Funds. I was pleased to see that this book raises an important question of valuation for when to commit to new purchases of indexed funds. People differ on this subject; but while the S&P 500’s multiple is as high as sit is now and cash flow growth is so weak, many people may benefit from holding off or buying other indexes instead. Consider the small cap value indexes instead now, for instance.I suspect that you can learn a lot by comparing your past stock investing with the patterns described here. Are you a great investor? Great investors have “independence of thought, . . . [and] utter and profound common sense . . . .” The challenge here is that “common sense is . . . it is so uncommon.” On the other hand, “those who buy stocks outside their circle of competence are gamblers, speculators, or fools.” Please wear the shoe that fits you.The most accurate prediction of future stock market conditions is that they will fluctuate. Currently, the average stock varies by 50 percent in price each year. What method of stock investing will allow you to either ignore or best take advantage of that volatility? Be sure to consider your emotions at least as much as your intellect and available time in making this determination.Get a great return on your time and on your investments!

⭐Please read the other reviews warning you about the content of this book. I did not believe them, they were right. Benjamin Graham and Warren Buffett are the two people I have modeled my investment style by. (Which has enabled me to return 24% over the past 4 years). How could I not read this book based on the title? While Cunningham did an outstanding job compiling the essays of Warren Buffett, this book was incredibly tedious and I do not think captured either of the great men’s thoughts. This book is 5% Graham, 5% Buffett and 90% the author. He is a law professor if that gives you an idea of the writing style.This book droned on for 40 pages about corporate governance, you had to read for hours to stumble on to a nugget of Graham and Buffett. Save yourself the trouble and buy Cunningham’s other book “The essays of Warren Buffett” he did an excellent job compiling that book.It is actually the book Warren Buffett told CNBC viewers to read to get his real investing style. Also read Benjamin Graham’s books start with “The Intelligent Investor”. Or buy Janet Lowe’s book “The rediscovered Benjamin Graham selected writings of the Wall Street legend” This book’s title should have been “How to think like Professor Cunningham’s students and invest like a teacher”.

⭐Gives you insight into the two greatest investors of all time think and handle their investments.

⭐Es ist schon eine Weile her, dass ich dieses Buch gelesen habe. Und es fiel mir sehr schwer, es zu beenden.Ich weiß also nicht mehr genau, welche Kritikpunkte ich hatte. Aber es war auf jeden Fall zu kompliziert geschrieben und bot zu wenig neuen und interessanten Inhalt. Mit der klaren und genialen Denk- und Schreibweise von Ben Graham hatte das ganz und gar nichts zu tun.Ich hab mich damals ziemlich geärgert, dass zwei solche Namen für einen so dürftigen Inhalt herhalten müssen.Und der Titel wurde komplett verfehlt!Aber wenn jemand wissen will, wie Benjamin Graham dachte, und wie Warren Buffett investiert(e), dann würde ich demjenigen raten, einfach “Security Analysis” und “The Intelligent Investor” zu lesen, und sich das Geld und vor allem die Zeit für dieses Buch hier zu sparen.Auf Amazon.com haben es Albert Cheng und Noah R. Freeman meiner Meinung nach auf den Punkt gebracht.

⭐Not found.

⭐Very educational and choc full of essential information for Value Investing. Very Good.

⭐Great book for anyone who wants to make money at investing.

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