The nice folks at publishers Wiley Finance recently sent TGI a complimentary copy of Christopher H. Browne’s new book The Little Book of Value Investing (Little Books. Big Profits)
I like the book because there is no Wall Street hype in it, just plain old common sense. Value investors of varying degrees of knowledge and experience should get something from the book. It’s compact, yet concise and can be read in one sitting. Browne manages to pack a lot of useful information in, while maintaining readability and adding touches of humor.
What is telling about Browne’s writing on value investing is that there is no “Magic Formula” per se — value investing takes work, reading balance sheets, cash flow statements, reports, and such. Do your due diligence! But it’s not as hard as it might seem, and the work involved is hugely rewarding.
One of the more interesting insights in the book is that it is OK to double down or buy more as a stock goes lower (also known as “catching a falling knife”), provided it is a well-capitalized, wide moat stock, with known good fundamentals and there is no known reason for it to go down other than the market has forgotten or ignored it. Anyone who follows the BMW method will be familar with this concept.
Several chapters stand out: in particular, the chapters on analyzing financial statements and the future prospects of companies are gems as is the 16-step checklist in Chapter 14 – “Send your Stocks To the Mayo Clinic”.
Insider buying is well covered, and seen as an important indicator of value. There is also an international aspect, which will appease non-US readers.
The bottom line is that Christopher Browne has been doing the same thing over and over again for literally a lifetime, just like Graham, Buffett, Walter Schloss, and Bill Ruane — all of them value investors who do the same thing over and over again simply because it works. The Little Book of Value Investing (Little Books. Big Profits)
