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  • Book Review: IN-N-OUT BURGER
    A few friends asked me why I was reading about In-N-OUT burger? They reasoned that you can't "do anything" with the information because the company is not public. Thankfully, I don't subscribe the same educational philosophy as they do.

    As a shareholder in Steak n Shake (SNS) I keep tabs on competitors too. Given that IN-N-OUT has long been the envy of most fast food restaurants, I reasoned that its worth learning about. Reading the history of Harry Snyder's In-N-Out Burger was quick -- the ~300 page book can be read on a long flight.

    Author Stacy Perman, chronicles how a family-run California hamburger joint has developed a cult-like following. Perman also uncovers a lot of family details that I'm sure the publicity-shy Snyder's would rather have been left unearthed. Harry Snyder, co-founder with his wife, was a stickler for three things: (1) great food using only highly quality products cooked individually by the store manager; (2) treating employees very well; and (3) customers are king. That simple operating philosophy was the foundation for which the chain was built.

    A lot of companies say the right things, but when push comes to shove they do something else. In-N-Out relentlessly lived their values even at the expense of short-term profits. At a time when competitors were flash-freezing everything in an effort to lower costs, Snyder remained unwavering on his commitment to ensuring all products were fresh. For example, potatoes, to this day, are still peeled daily in the restaurant.

    The book falls short on operating details. Aside from learning that Managers at each In-N-Out operate the grill, Perman never goes behind-the-counter to discuss strategy and finances. If you're interested in the history of this cult chain, pick up a copy of the book. You'll even learn the secret menu.

    The future of this great company rests with Lynsi Synder, the 20-something descendent of Harry Snyder's son Guy, who has been described as "reckless, impetuous, and irresponsible" among other things. It will be interesting to watch if this brand can survive the third generation of family ownership.

    As for Steak n Shake, I think the executives there are well aware of what factors lead to the success of IN-N-Out.

    The book is published by Collins Business


    Disclosure: Long SNS
    Tags: BH
    Mar 17 1:55 PM | Link | Comment!
  • Book Review: James Montier’s Value Investing
    James Montier is a highly respected, yet controversial, value investor. He’s widely regarded as an authority figure on applying behavioral finance to (value) investing. 
     
    Value Investing is a compilation of Montier's research reports written over years while working as the Chief Global Strategist at Societe Generale and Dresdner Kleinwort. 
     
    Montier’s witty prose quickly destroys the famed ‘efficient market hypothesis’ and all of its derivatives, demonstrates the fallibility of forecasters and forecasting (including the often employed discounted cash flow), and introduces readers to the growing field of behavioral finance. To get a feel for Montier's style, check out this excerpt. Most of the ideas that Montier dismantles are widely held beliefs by business school professors, politicians, and financial advisors. 
     
    Montier also shows you, with academic rigor, what works and how you can improve your investing process. 
     
    Having read most of his work already, I discovered a few things that I had previously missed. For example, I hadn’t seen Montier’s ten tenets of his investing creed. While these are nothing revolutionary to students of Berkshire Hathaway’s dynamic duo, Montier’s writing and stories are hard to forget. 
     
    This book is a must read for all participants in financial markets. 
     
    This book was published by Wiley
     


    Disclosure: No Positions
    Feb 24 2:19 PM | Link | Comment!
  • Book Review: Financial Statement Analysis and Security Valuation

    I wasn’t expecting much when I opened the mail to find a review copy of “Financial Statement Analysis and Security Analysis fourth edition.” After reading the book I was pleasantly shocked!

    I’ve looked long and hard for a good financial statement analysis book. In academia it’s hard to find a book that doesn’t use the words beta, alpha, or efficient market theory on every second page. The texts used in both my undergrad and MBA classes taught the (very) flawed efficient market hypothesis.

    In this book, Stephen Penman, professor at value investing school Columbia University, pens a thorough exploration of security valuation based on financial statements. Gone are the numerous references to academic fluff. Instead, readers discover a text influenced by the likes of Warren Buffett and Benjamin Graham. The text is underpinned by tenets such as, “one buys a business and not a stock” which when combined with the detailed financial explanations give the reader a profitable investment framework. Penman debunks a lot of common (and simple) financial formulas by showing their limitations.

    Purchasing a stock is purchasing an interest in the underlying business. Penman helps readers of this text learn to view a business through the lens of financial statements. You will be a slave to GAAP unless you know its limitations. The financial statements tell a story and this text gives you the tools you need to decode that story and think independently. This text clearly explains the difference between what is good and what looks good. 

    This is by far the best academic text I’ve read on financial statement analysis. Penman covers topics with enough detail that even experienced investors will find something of interest here. 
     

    Financial Statement Analysis and Security Valuation, by Stephen Penman (McGraw-Hill, March 2010).


    Disclosure: No position
    Jan 22 11:28 AM | Link | Comment!
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