Monday, March 30, 2015

Book Review: Education of a Value Investor

Hello my fellow investors!

Hope you're all having a great Monday morning thus far. 

Are you an avid reader? I personally read a lot. My reading habits have become even more prevalent since I finished graduate school and have more time to indulge in readings related to my passions. The pace in which I go through books, however, often exceeds the pace in which I write the reviews but I am trying to get better with this so please bare with me. 

If you missed the last couple of reviews, check them out here: Every Women should know her options and Elements of Investing.

Today I'd like to share my thoughts on a recent read recommended to me by a twitter follower, {thanks @JorgeGIA}.


Education of a Value Investor by Guy Spier.

I have to say the book was great. I would consider it a very educational, inspiring, yet straight to the point leisure read for all stock market investing fanatics out there. The book focuses on long term investing and the experiences lived by the author which have helped him become a successful value investor. 


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Mini Lesson:

Definition of Value Investing (per Investopedia): The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company's long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated. Typically, value investors select stocks with lower-than-average price-to-book or price-to-earnings ratios and/or high dividend yields.
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Guy starts the book by talking about his beginnings in the investing world when he was employed by a company that ended up being closed down by the authorities due to some "illegal activities". The author uses what he learned during that "less than favorable" moment in his life  to catapult himself in to becoming a successful portfolio manager with his own fund. 

The author details his initial struggles and having to rebuild his reputation practically from scratch after his experience at the company that was closed down. He doesn't allow the negative experience deter him from his ambition. Instead, he "does the best he can, with what he has, where he is" and continues to move forward, placing himself in environments and situations that would allow him to connect with the the type of successful people he wanted to be associated with. 

After reading so many technical books with heavy content, this book was  really a breath of fresh air. I was able to finish it during my flight to and from the Dominican Republic last week. 

There is so much I enjoyed about this book but I'll try to summarize some of my favorite parts of the book (without giving much away):

  • The author makes a decision to move from a very busy city in the U.S to a quiet European country and creates a whole "ecosystem" in the privacy of his new home. He goes in to detail about how he created this new environment and how it helped him thrive as a portfolio manager.
  • Guy talks about the things he added to his "world" and the things he eliminated, significant changes that allowed him to become very successful: "...create the best environment for yourself: physically, intellectually, emotionally."
  • The strong connections he made with selected people and the importance of being surrounded by people that motivate you and allow you to move forward in every aspect of your life.
  • The mentors, motivators, and coaches that  also contributed to his success (and how).
  • His relationship and interactions with Warren Buffet and Charlie Munger and what he learned from them (there is a lot of this in the book and I loved it). One of my favorite quotes: "Hang out with people that are better than you, and you cannot help but improve". -W. Buffett
  • A chapter entitled "Investing Tools: Building a better process" where the author uses his own experiences to outline some of the best tips he can provide that can all help us choose better investments and eliminate a lot of the day-to-day clutter.  While I wasn't in full agreement with a couple of the points he made, most of the tips on the list made perfect sense. 
One of my favorite tips: "...gather investment research in the right order...start with the least biased and most objective sources. These are typically the company's public fillings, including the annual report, 10Q and proxy statements...then, turn to less objective corporate documents..." while this makes perfect sense in retrospect, I don't think I ever took the time to really notice the way in which I conduct my investment research nor the order in which I read the documents I gather. Enjoyed reading this tip and several more. 

Wish I could go on and on about this book but I wanted this review to be short and sweet. I encourage you to check out the book for yourself and would love to hear your thoughts. Verdict: Highly Recommend. 

I am always looking out for new reads. So, if you have anything you'd like to recommend please comment below or email me at teachmetoinvest@gmail.com.

Thank you for reading & cheers to profits!
Mabel