Stock-valuation

"The Company You Keep" is one of the finest books I've read on "value investing". Spiced with interesting real-life examples, Mr. Terrion has done a marvelous job of describing successful long-term investment strategies. A compelling "must-read" for first-time or experienced investors.

I recently finished your book "Deal Terms" and found it extremely
helpful as we are looking into our first round of financing.

This book showed me numerous issues that I would have definitely overlooked or simply not thought of.
 
Thanks for writing Deal Terms. Definitely an invaluable
reference for anyone in business!

This book has a few sample drafts of term sheets and other legal documents. That is not the primary focus of this book. You can hire that kind of talent (legal drafting) on a per hour basis. This book helps the owners make the BUSINESS decisions necessary to avoid hamstring their new venture during this difficult passage. Included is information about what to pay your independent directors, advisory board members and senior management. Also included is what percentage of the company the founders should expect to keep, how to avoid excessive dilution during an unfortunate down round and how to present your opportunity to potential investors. All of these BUSINESS decisions are beyond the discretion of attorneys in this area, they typically instruct the entrepreneur to reflect upon the topic and then the attorney will draft it to suit.

Wilmerding interviews individuals that are representative of players an entrepreneur will encounter in getting his business funded. These real world examples of how business (strategy) items are handled or viewed by third parties are the best part of his book.

As a corporate attorney specializing in the area of venture capital and private equity I just completed reading "Deal Terms." I found the book to be insightful and a good resource, particularly in areas that are outside of my traditional bailiwick as a lawyer. A recommend this book for those new to the venture capital area as well as experienced investors, entrepreneurs and professionals.

John Ehlers has again written a book that I believe is detined to become an "investment classic".

I have three things I look for in investment books and newsletters:
1) Original Research
2) Explained Methodology
3) Actionable Strategy

Many books deemed "classics" fail to meet one or more of these criteria. Very few meet all three. John Ehlers is rare in achieving all three with his works.

1) Original Research - Original research is key to being successful in the market. A technique that everyone knows is unlikely to work very well for trading or investing. Ehlers is a pioneer in applying advanced cycle measurement theory (MESA - Maximum Entropy Spectral Theory) to the stock market. In Cybernetics he extends and builds on his cycle work by also applying very advanced and sophisticated Digital Signal Processing (DSP) techniques to trading the market. More information on Ehlers MESA work can be found at www.mesasoftware.com. To my knowledge there is no one else using and reporting on the application of DSP to the market.

2) Explained Methodology - In my opinion this is where Ehlers really shines. While these DSP techniques are extremely sophisticated and mathematically intense, Ehlers cuts to the chase in a very concise fashion, explaining the core principles, presenting the math, but leaving the derivations and complication to the textbooks and the engineers. Ehlers makes the techniques acceessible to the trader/investor without trying to turn the reader into an Electrical Engineer.

3) Actionable Strategy - all the tools presented in the book are fully disclosed and accompanied by complete TradeStation Easy Language Code and eSignal Formula Script (EFS). In addition the code can be purchased from www.mesasoftware.com for a modest cost, to save yourself the typing and debugging time (your time is worth something). I use TradeStation. With the fully disclosed code, all of the indicators can be displayed, modified (if desired), combined with one another or other indicators, and your own systems created. Those systems can then be back-tested in TradeStation to see how they performed. They can also be optimized and otherwise worked with to create systems that work for you.

Ehlers has created a "cookbook" of indicators that use some of the most advanced concepts ever applied to the market.

Ehlers states: "... (the) historical performance of these systems is on a par with or exceeds, the performance of systems that would cost you thousands of dollars to purchase". Analysis with TradeStation confirms this.

Professor Rappaport's revised version of his 1986 book on creating shareholder value provides a good description of the value based management concept that he helped create. However, many of the chapters are stand alone sections that do not flow well together. In some chapters he does not provide enough depth on how this book can actually be used by managers. In addition, the chapters on using his concepts to formulate value-maximizing business strategies was somewhat lacking.

Nevertheless, the book was an easy read and many of his points were right on target. I would also highly recommend interested readers to check out "The Value Imperative" by Marakon Associates and "Valuation" by McKinsey & Co for more information on value based management.

Professor Rappaport's revised and updated edition, provides a clear explanation of shareholder value concepts and application. One welcomed insight: he compares and contrasts the various shareholder methodologies (EVA and CFROI). As an indepent consultant specializing in shareholder value, I owe professor Rappaport and "Creating Shareholder Value" a debt of gratitude for introducing the critical link between corporate finance and competitive strategy. This is definately the "classic" work on shareholder value.

Given that investors value bonds by discounting future cash flows, it stands to reason that they value stocks in the same fashion. Alfred Rappaport is the founder of the shareholder value mindset which gained importance in the '80 and is widely accepted in this new millenium. Rappaport starts the book explaining that objections to using a discounted Cash Flow model do not hold. Strong arguments and empirical evidence is given to explain the market's valuation mechanism. What follows is a basic but thorough explanation of the 3 elements for valuing a company (cash flows , risk and the competitive advantage period). In the second part of the book, it will become clear for the reader DCF is closely linked to strategic analysis and is not in contradiction with stakeholder analysis, customer value analysis, Activity Based costing or any other tool. On the contrary, Rappaport shows DCF is a communication tool that helps investors understand a company's implied performance and how to (re)act. Together with the Valuation book from Copeland, Koller and Murrin this is the book you need.

To even to most junior quant, this book would be content free. What's more, he promises the revolutionary new Calamos valuation method (now, not even Nobel prize winners name their theories after themselves, they let other people do it for them, so already, suspicion) but again, nothing, just some snapshots from the screen of his software. The book blurb is misleading, it actually promises the method, not just an advert for it. Do not buy this book, you will learn nothing.

The table of contents and size of this book suggests a real winner, perhaps even a Graham & Dodd treatment of the convertibles arena. The wonder is how such a long-winded tome can leave the convertibles student so wanting. The book's problem is probably the author's conflicted intentions: "Do I want my readers to go out and find some nice convertible bonds, or do I want them to pay me to go find them some nice convertible bonds?" Guess who gets short shrift?

The introduction to convertibles section is reasonably well written. But the analysis and strategy sections of the book are suspiciously hazy. I say " suspiciously " because the book's author delivers just enough information so one might be comfortable handing over portfolio management to the author's investment management firm, but not nearly enough to implement a portfolio for oneself. Even Calamos' simple price model is insufficiently described.

Thus, after a windy, winding road of nearly 400 pages, CONVERTIBLE SECURITIES reads as a mediocre introduction to convertibles imbedded within an advertisement for the Calamos firm (for which I had to pay $65!).

Upon reading this book I realized what I was missing from my portfolio. Investing in convertible over the past 3 years has enabled me to keep my head above water since the market peaked back in 2000. My portfolio was only down 4% in 2001 and 5% in 2002 because of the addition of converts.

I think the book's treatment of valuation is too academic. The author should use more practical examples.

I've been looking for a practical step by step book on equity analysis from a practitioners viewpoint. This is it. Other books try to take shortcuts. This book does not take short-cuts, but neither is it bogged down with unncessary academic exercises. If you really want to understand how to do valuation and applied equity analysis I can't recommend any book more highly. It is head and shoulders above anything else out there. Penman's book (from Columbia Business School) is also good but it is a VERY serious and weighty book that probably should only be attacked after you have read this one. Get this book by English and you will not be sorry. I have spent way too much time reading hundreds of other books that weren't nearly as educational. Again, however, it is only for the serious investor.

James English's "Applied Equity Analysis" is a how-to manual on evaluating stocks based on his 20 years of experience at JP Morgan. The book is very well-written and readable since the author employs plain english (no pun intended) to make his three major points: 1) accounting numbers--while by no means perfect--are excellent tools in evaluating stocks, 2) accounting-based stock valuation is superior to (but does not neccessarily supplant) cash flows, and 3) competition ensures that eye-popping financial performance doesn't last forever.

Contrary to another reviewer, English employs excellent examples to clarify and explain his points. Some examples: Gateway 2000's earnings history was used to explain how to find and interpret non-recurring items (NRI) on financial statements. Ratio analysis was demonstrated by looking at the PC industry in 1998. Emerson Electric was the company chosen to show why mature companies were still good buys. Many other examples abound, and English does a successful job in tying their relevance to his arguements.

But successful use of examples is not just the only strength of the book. The author also tackles a range of topics complete with insightful and clear discussions: the flaws of the Efficient Market Hypothesis (EMH), Economic Value Added (EVA), financial statement analysis, fundamental analysis, etc.

A quick glance at the table of contents below gives you an idea of the scope of English's book. I highly recommend this book to not just Wall Street analysts, anyone who is interested in finding fundamental value in evaluating stocks instead of following the crowd.

Pt. 1Getting Started
Ch. 1A Day in the Life
Ch. 2Fundamentals of Equity Valuation
Ch. 3Strategy and Competition I: The Firm's External Environment
Ch. 4Strategy and Competition II: The Firm's Internal Competitive Resources
Ch. 5Fundamentals of Stock Behavior
Pt. 2The Basic Tools
Ch. 6Reading a Financial Statement: The Accuracy, Sustainability, and Predictability of Financial Information
Appendix 6-1Gateway Financial Statements
Ch. 7Reading a Financial Statement: the Composition of Returns
Appendix 7-1Comparative Financial Analysis: Personal Computer Industry
Ch. 8Reading a Financial Statement: Early-Stage Companies and Investment Capacity
Ch. 9Reading a Financial Statement: Later-Stage Companies and the Transition to Maturity
Ch. 10Economic Value Added: An Alternative to Traditional Analysis Techniques
Appendix 10-1Gateway's Cost of Capital
Pt. 3Financial Models
Ch. 11Financial Modeling: Base Case Assumptions and Model Design
Appendix 11-1Dell Computer Corporation Consolidated Statement of Income
Ch. 12Financial Modeling: The Income Statement and Balance Sheet
Ch. 13Financial Modeling: The Statement of Cash Flows
Pt. 4Equity Valuation
Ch. 14Valuation: Foundations and Fundamentals
Ch. 15Combat Finance: Relative Methods and Companion Variable Models
Ch. 16Hybrid Valuation Techniques
Ch. 17The Quirky Price/Earnings Ratio
Ch. 18Valuation of Speculative Stocks
Ch. 19Equity Analysis and Business Combinations
Pt. 5Getting It Down on Paper
Ch. 20Financial Writing: Don't Bury the Lead
Bibliography
Index

Although my husband and I are fairly sophisticated investors, the title of this book appealed to us. It's written in an easy to read style, without complicated graphs and charts and without a lot of investment jargon. For us, it was interesting to read how the pros on Wall Street pick their stocks -- to "get into their heads" a little-- by reading the profiles. However, this book is really ideal for the novice investor, because it covers many topics and is a terrific overview. The lessons are short, but we see that as an advantage for someone who is new to investing. If the lessons were too long or too complicated, a new investor might not stick with the book long enough to finish it. There is a lot of information in this book. In fact, we're recommending it to some friends who want to get into the stock market, but have no idea where to begin. They would have to spend months reading to learn what's condensed in this book. The book also helps would-be investors learn about sources of information on the Internet (and other places). We think this is a great first book for anyone who wants to get an overview of investing.

This book was the first book I read about the stock market and I found it an easy read and it opened up my mind for the stock market. Acctually it gave me a different view. Much more relaxed view if you like. At the same time I found the author repeting himself too often. You will need further reading but this book is a good beginner and it also plays a role as a guide for further reading.

It is funny how different people can have so many conflicting opinions about the same book. The author interviewed some of the most famous and successful investors in the country. You have to be out of your mind not to come away with something useful. The lessons are not obvious, at least to this humble long-term investor. Maybe if you know everything about the stock market, then devising a strategy, creating rules, cutting your losses, holding winners, minimizing risk by using dollar cost averaging, avoiding trading options and futures and 101 other lessons might be common-sense, but not to me.

Bottom line: One of the best books I have read on investing in the stock market.