Though not exactly a book related to value investing, this oft-cited work of Princeton economist Burton Malkiel discusses many important features of stock market investing. An understanding of its prime contentions is useful for beginners and experts alike.
A Random Walk Down Wall Street: Chapter 1
By Saj Karsan, Sunday, November 8, 2009, 6:47 AM | A Random Walk Down Wall Street, Malkiel | 0 comments »The Little Book That Beats The Market: Appendix
By Saj Karsan, Saturday, November 7, 2009, 6:34 AM | The Little Book That Beats The Market | 0 comments »
Joel Greenblatt, the book's author, is a value investor extraordinaire and a professor at Columbia's business school. In the book, Greenblatt discusses and justifies the "Magic Formula", a stock selection method that allows individual investors to beat the market using value investing.
The Inventory ADDvantange
By Saj Karsan, Friday, November 6, 2009, 6:27 AM | ADDvantage Technologies, circle of competence | 2 comments »A company that makes for a good investment for one value investor does not necessarily make for a good investment for another value investor. How can this be? A company may appear cheap on an earnings or asset basis, but future earnings may not live up to current earnings and assets may be written down. Therefore, only when a company falls within an investor's circle of competence can he ascertain whether a stock is trading at a discount.
Buffett vs Value Investing
By Saj Karsan, Thursday, November 5, 2009, 6:49 AM | Warren Buffett | 4 comments »
Don't Be Fooled By High P/E Values
By Saj Karsan, Wednesday, November 4, 2009, 6:56 AM | Key Tronic | 3 comments »As the market has risen throughout most of this year, many market observers have noted that P/E values are looking rather inflated from a historical standpoint. But of course, earnings are lower than usual this year due to reduced revenue that was caused by financial shocks. So as investors, should we be willing to pay a higher P/E for now, on the assumption that earnings will soon pick up?
Increases In Consumer Spending Do Not Make Us Better Off
By Saj Karsan, Tuesday, November 3, 2009, 6:19 AM | 3 comments »Contrary to popular belief, increases in aggregate spending (e.g. consumer spending) is not what leads us to a higher standard of living. Nevertheless, both in good times and bad, consumer spending is the gauge the media focuses on as a barometer of how we're doing; but consumer spending is only a measure of short-term demand. Increases in standard of living, however, come from our ability to do our jobs more efficiently.
For example, consider a plant that employs 1000 workers and makes one widget per day. Suppose one day the plant manager comes up with a new method of making that widget, and only requires 500 workers to do it. The remaining workers just got richer, because now the revenue from the widgets sold is spread over fewer workers. (In practice, of course, this process would take time, and the higher profits would be shared among owners and labourers through market forces. Furthermore, the 500 laid off workers would undergo short-term difficulties until they could join a company that's expanding.)
The aggregate nation-wide level of these efficiency improvements is referred to as productivity growth. Here's a look at US productivity growth (in percent) over the last 60 years:
Productivity numbers are reported every quarter, but are not given the attention they deserve. Government policy should be geared towards encouraging productivity gains, which come from savings which leads to investment. Instead, governments often focus on increasing consumer spending, which causes short-term pick-ups in demand (and therefore increases GDP and reduces unemployment in the short-term), but makes us no better off in the long-run.

