I've recently finished reading The Little Book of Value Investing by Christopher H. Browne. It was an excellent follow-up to The Little Book that Beats the Market. For those who are unfamiliar with these books, they are part of a relatively new series from Wiley called "Little Book Big Profits." The series features industry icons who share their investing philosophies through short and approachable chapters.
So far, the two books which I've read both take on a value approach to investing. However, the authors use different styles and priorities when it comes to locating stocks. I'm looking forward to the next book in the series as well, "The Little Book of Indexing" which will be written by John Bogle and hopefully released soon.
Chris Browne, like Warren Buffett and Bill Miller, is a world famous Value investor. His father was a founding partner in Tweedy, Browne and Reilly, over 60 years ago. Back then, money managers weren't as transaction-focused as they are today. The stock markets were less efficient then, prior to rapid electronic trading and market makers creating the sort of liquidity for stocks we have today. To be in the business during the 50's and 60's, and stay in the business through the tremendous amount of change which has transpired, shows a certain degree of discipline and earns you a great amount of respect.
Browne emphasizes his discipline in the book by pointing out that a lot of the philosophies utilized by himself and his firm back then still apply today. Those principles, he says, can be taught, can be learned, and require patience to be successful.
I love the simple analogies Browne uses to convey his points. He takes a theme through the book of buying stocks which are selling at cheap prices as analogous to buying groceries which are on sale. This is a crucial element of Browne's claim that if one is patient and thorough, they can find stocks which have similar or higher growth potential to their peers while taking on less risk.
Another part of the book which makes it particularly valuable is the focus on international investing. Browne dedicates chapters six and seven to searching abroad for value and then continues the theme in chapters fifteen and sixteen when he talks about the risks (such as currency and accounting) which complicate stock-picking outside the United States. He makes some interesting points about using the valuation ratios of companies trading in developed countries as examples for international stocks in similar sectors which may be undervalued. That's all I'll say short of disclosing Browne's value tips. Grab a copy if you want to get the full story. The whole thing took me about three hours to read.
I am also delighted to see that authors on investing are starting to write books which are shorter and simpler to understand. As Browne shows, a book on Value investing doesn't have to be full of charts, graphs, and financial jargon. It can make points which are easily understood without all the confusing language. A great read!
For another review of this book, see Steven Rosales' writeup from October 8.