Saturday, October 10, 2009

BAGAKOAA; October 10, 2009


October 10, 2009

Had a great morning after visiting briefly with my golfing buddies. I enjoyed breakfast and finally finished reading Katsenelson’s Active Value Investing. I mentioned this book about a month ago, but I got distracted with Dan Brown’s The Last Symbol. Great Book. Better than DVC, and almost as good as Angels and Demons.

But I digress, Katsenelson’s book, subtitled “Making Money in Range-Bound Markets”, could be very relevant in the next 12-18 months. The author suggests that the next 10 to 20 years will be extremely volatile and will end at a place not much higher than today’s relative values.

Can’t say I agree with anyone prognostication 10-20 years out, none the less three quarters out, BUT, (Behold the Underlying Truth), the market has had a robust recovery to almost halfway off its 07-08 highs. Looking back, most would agree we were running hot back then and equities were well overvalued.

If you subscribe to that thought, as I do. We are at a place where values are headed back to maybe where they might belong. If that is the case as I suspect, understanding equity values becomes more important than ever before as you must find solid values that ideally pay you to play via dividends.

After a nice historical perspective of the markets, the author spends the second half of the book on very practical and fairly easy to understand equity analysis techniques and familiarizes us with terms like Absolute P/E Ratios and P/E ratio compression. Then he defines three approaches to valuation, Quality, Value and Growth or QVG components.

It is a great read and very informative. It should belong on anyone’s shelf next to “The Intelligent Investor”, “Security Analysis” and Cramer titles. Here’s a deal for you. The first person to comment on any posted blog can have a free copy of the book. I am buying a few for people I know will use it.

Salve Lucrum


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