investment

**grapes** Thu Jul 14, 2005 4:37 pm

investment
Hi Blast,

what do you think is important in value investing? and how important?
regarding
1. instinct
2. knowledge
3. experience
4. leg work, info gathering

Thanks

grapes

**blast_investor** Thu Jul 14, 2005 9:16 pm

grapesmailbox:

I would change 1. instinct to Psycology. Value investing is well-defined investment style that have its own rule and domain. Instinct or quick decision based on "feeling" or instinct is not important. Phycology is pretty important. Value investors need to buy when everyone else are panic and sell when everyone else are enthusiastic.

Knowledge and experience are very important, especially valuation modeling on different industry is different. Value investing is mainly a business investment style so that understanding business and constructing valuation math modeling takes a lot of knowledge/experience.

Information gathering is important too. But nowadays, the difficulty is how to analyze or utilize information, how not to mis-use information metrics provided by Yahoo finance.

With BIRTP newsletter, you get my stock picking analysis and information update on picks regularly. Hopefully, the method in BIRTP newsletter can help you find other interesting picks too.

**grapes** Mon Jul 18, 2005 5:34 pm

Hi Blast,

Thank you very much for sharing this.

Regarding knowledge and experience, how and where do you suggest me to learn those from? I don't even have knowledge about the business of the company I currently work for.

I tried to search for books but really none of the books I found teaches this type of information. I talked to our former CIO and ask him where to learn those and he said it's different from company to company and from business to business. The only way to learn that is by working in those companies. Of course that was not the answer I was looking for.

Could you share how do you think is the realistic way to gain those knowledges? Thank you!

grapes

blast_investor wrote: grapesmailbox:

I would change 1. instinct to Psycology. Value investing is well-defined investment style that have its own rule and domain. Instinct or quick decision based on "feeling" or instinct is not important. Phycology is pretty important. Value investors need to buy when everyone else are panic and sell when everyone else are enthusiastic.

Knowledge and experience are very important, especially valuation modeling on different industry is different. Value investing is mainly a business investment style so that understanding business and constructing valuation math modeling takes a lot of knowledge/experience.

Information gathering is important too. But nowadays, the difficulty is how to analyze or utilize information, how not to mis-use information metrics provided by Yahoo finance.

With BIRTP newsletter, you get my stock picking analysis and information update on picks regularly. Hopefully, the method in BIRTP newsletter can help you find other interesting picks too.

**blast_investor** Mon Jul 18, 2005 9:43 pm

grapesmailbox:

There are books covering the knowledge and experience of value investing. If you want to do it your self in value investing, here is way to go:

Read all 3 books:
http://www.blastinvest.com/phpBB2/viewtopic.php?t=29

These books are summary of knowledge and experience from 3 famous value investors.

Then you study the deeper book: Security Analysis by Benjamin Graham.

The rest will depend on the real-life experience in stock market. Apply the knowledge in the above books into real-life investment with home work, you would do well.

**grapes** Mon Jul 18, 2005 11:06 pm

Hi Blast,

I've read "intelligent investor" twice and I think I got most part of the idea. I have also read "one up one wall street" twice. After teh 2nd round I got some of Peter Lynch's real idea about stock picking, for example, the key to pick cylicle and the growth stocks. In "beating the street" he explained a lot details about S&L stock. I have not learned the real value of peter lynch's book yet, but I think I made some progress. The 1st time I read it, I was thinking that the author was hiding the details, while after the 2nd time, I realized that he is telling the most important details.

I have read "Security Analysis" only once. It took me months to complete it. That was a wonderful book and I have learned a lot from this book regarding investment accounting knowledge as well as the business in railroad(not very useful anymore), water and unility, and mining.

However I have a lot to learn on the "how". Using Peter Lynch's word, "finding a good company around you is only half the battle.... you have to develop a story on this company". Developing a story need a lot more knowledge in the type of business itself. For example, I am doing a research on a fire insurance stock these days, and I need a book to learn more about insurance business.

I guess those valuable knowledge are in the CEO's brain and few CEO wants to publish it. Another fact is that business changes so fast and a book may not be able to keep up with the pace of reality. But I'm still thinking maybe somewhere we can find some book to pick a peice of the most valuable brains in the world. Buffett's letters to shareholders are surely among them.

Could you have some advice for me as to how and where to get the knowledge of the underlying business? Thank you!

grapes

blast_investor wrote: grapesmailbox:

There are books covering the knowledge and experience of value investing. If you want to do it your self in value investing, here is way to go:

Read all 3 books:
http://www.blastinvest.com/phpBB2/viewtopic.php?t=29

These books are summary of knowledge and experience from 3 famous value investors.

Then you study the deeper book: Security Analysis by Benjamin Graham.

The rest will depend on the real-life experience in stock market. Apply the knowledge in the above books into real-life investment with home work, you would do well.

**blast_investor** Tue Jul 19, 2005 9:44 am

grapesmailbox:

When you pass the level of book, the most important information source is annual report and conference calls. No book can replace these 2 sources. I would study the annual report and conference calls in the same sector in order to understand the industry.

**n_xian** Tue Jul 19, 2005 3:40 pm

Good post. I suggest put this thread into sticky state. I also read "Intelligent Investor" and Peter Lynch's book. But did not make much progress. Maybe it is time to read the books again.

Thanks,

n_xian

**lzhang** Tue Jul 19, 2005 4:22 pm

I think another book, which might not be in favor of value investor, A Random Walk Down Wall Street, is worth to read, too.

I have a latest version of it. I noticed several changes of the author's view of value investement. In a previous version, the author claimed that in Ben's later years, he (Ben) adimitted value investement was getting harder to do and one could be better off to invest in index funds. Now in his book, the author quotes that for a long run, stock market is not a voting machine, but a weighting machine. He even mentioned WEB is a successful value investor following Ben's method.

I think it is good to read this book, especially the first several chapters talking about all the irrational things about stock markets, and you will realize all these books of Graham, Lynch, and Malkiel, are talking almost the same thing. I think the difference might be Graham to focus on the analysis of stock fundamental, giving you the method, Lynch and WEB to focus on the business, and what the random walk teaches you is if you are not an expert in any of these two, just do not do crazy, irrational things and even random walk will be better off for you.