Book Reviews, Value Investing

Book Review: How to Think Like Bejamin Graham and Invest Like Warren Buffett

Rating: Below Average

3rd book in my attempt to devour all books Buffett. In case you're wondering, 4th book will be "Trade Like Warren Buffet", followed by "The Warren Buffett Way" and the final finale is "Essays of Warren Buffett"

Not much real substance as to how to pick stocks, but still some noteworthy points:

Thought-provoking items:

  1. There is a tax advantage in doing your own investing as opposed to using a mutual fund. When you make a capital loss, you get a tax deduction for the loss. However, if the mutual fund makes a loss, you don't get the tax benefit and you are still slapped with the management fee.
  2. There is a pretty interesting parable of an old man trying to sell his apple tree. The bids go like this: 1) salvage value, 2) one year's earnings, 3) 10 years earnings without discounting, 4) last guy's bid, 5) capitalising earnings including discount rate + expenses + depreciation. The book makes that point that two methods are reasonable. 1) capitalising earnings such as 5) above. or 2) using real cash flow + discounting. On the one hand, the first method monkeys around with depreciation assumptions, and on the other hand, the 2nd method has to predict future lump sum cash outflows. But this gives me more assurance of my initial inkling to use cashflow.
  3. Quote from Goizueta of Coke, who quoted German poet and playwright Goethe: "Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now"

– END –



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