Book Review: Joe Ponzio's F Wall Street

The last proper investment book review I wrote was on The Art of Short Selling. Since then I’ve read a few investing and non investing books but of the investment books I went through, nothing was worth writing about.

The Only Three Questions that Count by Ken Fisher was rubbish and I gave up half way. I didn’t find it helpful in any investing or behavioral finance areas. The foreword by Jim Cramer should have rung an alarm. I much prefer Philip Fisher’s Common Stocks and Uncommon Profits.

I also would have enjoyed Contrarian Investment Strategies a lot more had it not been so redundant.

So a big pile of frustration was lifted when I received F Wall Street: Joe Ponzio’s No-Nonsense Approach to Value Investing For the Rest of Us. Forget Wall Street? Fudge Wall Street? or what ever you wish to call Wall Street, F Wall Street provides an in-depth look and discussion of what Wall Street is really after (your money), how you are better off investing on your own, how to value businesses, how to manage your portfolio and more. Let me try and go through it briefly to whet your curiosity.

F… Wall Street

This book is targeted towards the beginner to intermediate investor but is still a great read for the advanced. It is an easy to read book that doesn’t try to lose you in jargon and an overwhelming mess of formulas and symbols.

What I especially liked about the book is how it addresses many of the topics that other investing books do a terrible job of doing or refuse to go into. Topics such as how to value a business, how much to buy, tracking your businesses and when to sell.

Book Structure

The book is structured into four sections.

The first part deals with the basics. Issues such as Wall Street myths, stock market perceptions, mutual funds, risk and how businesses and their stock grow. Joe is able to take the boring and dryness out of the common finance topics and explain it in a clear and easy to understand manner. The simple to understand examples certainly do help in conveying the message.

Second, it looks at how to approach investing from a business perspective. Meaning, stocks are small pieces of business. Not speculative lottery tickets. Joe introduces us to the concept of “price follows value” as well as how to value a business by reading the financial statements.

Again, even a high schooler would do better in school to read this book when it comes to ease of understanding.

Are you still apprehensive and overwhelmed when thinking about financial statements? Then start reading this book.

It continues on to a simple yet detailed and full blown discussion of Buffett’s owner earnings, with examples in JNJ, MSFT and ABT. Joe also kindly explains how to use Excel’s present value function. I’ve yet to come across any other investing book that tries to help you calculate the intrinsic value of a company like this book does.

I found the third section to be very interesting. All about managing a portfolio: When to buy, how much to buy, keeping track of your businesses, when to sell and a good section on workouts and arbitrage. My first arbitrage of Tribune corp is also in the book.

The final and fourth part discusses the psychological aspect of investing. Investors are classified as “The General Conventionalist”, “The Enterprising Conventionalist”, “The Safety Seeker” and “The Non-Conventionalist”. As I’ve mentioned a few times long ago, an investor is successful when they understand who they are and what style they fit. A nice look at bonds and patience wraps up the book.

Summary

In case you haven’t noticed, I really enjoyed this book. I didn’t have the time to read it in one sitting, but it took about 6-7 20min sessions to see it through.

This book is now my number 1 or 2 recommendation for all new to intermediate investors and earns its place on my very selective recommended reading sidebar, where even The Intelligent Investor doesn’t have a place.

Comments

[market ace:]

I was impressed with the book until I read:

"stocks are small pieces of business. Not speculative lottery tickets. Joe introduces us to the concept of “price follows value”

This may have been true at one time, but now stocks rise and fall on unwaranted analyst reco's, obvious maipulation and rising and falling with indivdual industries regardless of their idividual merits. Too much trading today is all done by computers and based on mathematical formulas and charts and has nothing to do with the fundamentals of the underlying company. Reading the book may be interesting, but it probably has little application in the modern world of Las Vegas style stock markets where gamblers and traders, and not investors, rule the day.

Jun 15 10:17 AM

[Market Sniper:]

Thank you Jae! Based on your review, I just ordered the book. I have found that if you can find just ONE good idea in a book, it was worth the read. Tend to agree, short term, with market ace. However, that can be said of any market at any time in history. We are ALL traders. Just we all use different time frames. Buffet is a trader. Just his time frame tends to be decades. Without "gamblers" and us evil day traders, your "investors" would have no liquidity. Everyone surves a purpose as a market participant.

Jun 20 02:43 AM

[Archman Inv...:]

Thanks for the great review. I myself do not put enough time into reading, so these sort of review are very helpful.

I did get a kick out of your segment where you wrote:

"The Only Three Questions that Count by Ken Fisher was rubbish and I gave up half way. I didn’t find it helpful in any investing or behavioral finance areas. The foreword by Jim Cramer should have rung an alarm."

Ken Fisher (being the billionaire that he is) is another perfect example of Wall Street at it's worst. Asset gatherers who become wealthy beyond imagination by marketing people to death over the internet and by mail. It actually takes on a life of its own where the public becomes "convinced" that people like Ken Fisher actually know more than everyone else, when in reality, they don't.

Fisher has lost just as much money and the average mutual find manager / Wall Street shills, etc.

The only difference is:
Fisher can just afford huge advertising / spam / and junk mail campaigns to "convince" people just how smart he is.
Plus having your buddy Cramer write the forward of your book, doesn't hurt either.

Jun 20 12:35 PM

[icepop:]

Ok, I ordered the book based on your recommendations as well, market ace's comments notwithstanding.

ok, so in further review of your review you said " This book is now my number 1 or 2 recommendation for all new to intermediate investors and earns its place on my very selective recommended reading sidebar, where even The Intelligent Investor doesn’t have a place."

What is the other book you recommend in this category ?

Thanks.

icepop

Jun 22 12:20 AM

[seetch:]

Am about three quarters through the book and I agree, this is a great book. I had read a few books about value investing (Rule #1 is another good one) and I think Joe's way of calculating Intrinsic is more accurate. Also his way of looking at Cash rather than earnings makes sense too. My suggestion is to take a combination of the two (Rule #1 and FWall Street) methods of calculating intrinsic value and make a judgement call on both sets of results.

And I have to agree that Ken Fisher's book "The only 3 questions you need to ask" is utter rubbish! I gave up on it half way through too and I'm wondering how it ever got on the NY Bestseller list!

Jun 22 03:03 AM

[Jae Jun:]

Sorry for the late responses. Was away on vacation :)

@ market ace
I do agree with you that traders rule the day and stock prices fluctuate without any fundamental reasons but as a deep value guy, I still firmly believe that the markets misprice many businesses.

The benefit of the traders is that I now only have to wait 2-6 months before the value is realized rather than 2-5 years like before.

Jun 29 03:59 AM

[Jae Jun:]

@ Market Sniper
Thanks for the comment. Thankfully I've learnt to apply the common sense investing approach described by Joe and it has clearly helped in yielding some very high returns.

Jun 29 04:04 AM

[Jae Jun:]

@ icepop

The other fantastic book for the beginner to intermediate investor is Pat Dorsey's "Five successful rules to stock investing".

F Wall Street and Five Rules are the only books I recommend in the learning category.

Jun 29 04:06 AM

[Jae Jun:]

@seetch

I bought Ken Fisher's book based on the many reviews on Amazon... what a joke really.

I kept cringing at every page from the beginning. Especially when he kept going on and on for 80-90 pages on why a high PE doesn't mean a stock is expensive... utter crapness.

Jun 29 04:08 AM

[Jae Jun:]

@ Archman Investor

I wish I knew more about Ken Fisher before buying the book. I figured that if he wrote in a similar fashion to his father, it would make for a good read.

Sad thing is I just made Ken a few extra dollars to add to his millions... doh

Jun 29 04:11 AM

[investolator:]

A significant book most people don't know about is "100 to 1 in the
Stock Market" by Thomas W. Phelps, published in 1972. This is the book that introduced the concept of moat only the author calls it gate.
Buffett just changed the name. Chapter 24 is "Buy Right and Hold On" in Practice. Chapter 28 is Real Growth-How to Spot It and Evaluate It. After one reads this book, one understands what changed Buffett's 1960s Benjamin Graham approach to a buying growth stocks and holding them forever approach in the 1970s.

Aug 06 01:44 AM