Brian Nichols

A Great, Simple Guide to Value Investing

In a nutshell: In a turbulent age, value wins out. A clear, concise guide to using value investing to take control of your financial future.

As someone who has studied the basics of value investing before, as someone who has done the Buffetology workbook, has read Peter Lynch’s One up on Wall Street, and has regularly browsed website explaining the basics of investing, including how to read a balance sheet,I was pleasantly surprised that I did not learn too much that was new from this book.

Surprised you ask? Pleasantly?

The truth is that value investing should be simple, and to the brainier population, it should even be a little boring.

A book about value investing should be a wholesome, nutritious, and a little dry.

Nichols makes the point in early chapters that the act of finding value in stocks can be a lot like looking for bargains at a garage sale. What is most needed is good research, patience, and an understanding of your own mental process.

What I loved about this book is the way each chapter was prefaced with quotations from value investing gurus like Peter Lynch, Warren Buffett, and Benjamin Franklin. Popular books shouldn’t have overly thorough attribution--and certainly there is not much new under the sun when it comes to value investing (after all, it makes its reputation by not being trendy)--but I felt these quotations served a very important kind of attribution function. The gurus behind the guru.

One of the more interesting points made by the book--the value-added if you will--is that value investing is important now more than ever. This argument has to do with the current investing climate, a climate where investors can expect flat or "negative" markets, companies with lots of cash bracing for the worst, and what other authors have called “market perturbations”. In other words, we are now living in a world of constant turbulence and uncertainty. Thus, now is a time to look beyond irrational optimism and pessimism and to believe in “value”.

Since I’ve read quite a lot on political economics, I kept hoping that Mr. Nichols might try to say more about why these events were occurring, why market perturbations and even a depression might be expected, but alas, it was probably good that he didn’t go too deep into the subject, instead chiding readers to study the 2008 recession and the various government and other responses to it.

Why only four stars? It’s harsh to say so, but I still think Peter Lynch’s book One Up on Wall Street is the best book written on value investing. That’s a harsh standard of comparison. But even against this harsh standard Nichol’s book holds up very well. And that's quite an accomplishment.… (meer)