Average Reviews:
(More customer reviews)The book is OK on general principles-Don't time the market; Study companies; Diversify; Develop your own investment plan, Etc. But I bought the book for specifics of value investing-how to read and evaluate annual reports and financial statements. I was expecting chapters 3 and 4 to be the most helpful of the book. Unfortunately I did not find that to be the case-information on how to evaluate annual reports and financial statements could have been more detailed and complete and there are confusions/errors about some of the key evaluative tools.
Current Ratio: Pages 43 and 53 says a Current Ratio of 2 OR LESS is good. Page 51 says 2 OR MORE! Actually I think it is 2 or more-because there should be no more than $1 of current liabilities for every $2 of current assets.
Quick Ratio: Pages 43 and 54 say a Quick Ratio of 1 OR LESS is good. Page 51 says 1 OR MORE (Appendix A says 1 to 10). Actually I think it is 1 or more-because a company should be able to cover all its current liabilities with current assets less inventory.
Financial formulas can be complicated and there may be no one clear-cut answer for all situations. If so, a discussion should have been included to help readers apply these tools.
Gross Margin: Page 63 shows Walgreen to have a Gross Margin of 94%. It is not clear how a gross profit of 12,655,000 was arrived at-the closest thing I see is a total of costs and deductions on page 59 which is listed on the 10K as "net revenues". While this is most likely a minor glitch, it should have been caught by the author or editor.
Two other criticisms. First, the use of the charts by Bigcharts.com. What do they mean and how should I use them? If charts are included in a text, they should be clearly labeled and there should be an explanation of how to use them.
Second, choice of material on which to base the book. The author based some of the book on interviews (most by telephone) with 5 value investors. Why/how were these interviewees chosen? I think journalists who include interviews should explain the justification for their choice of interviewees. This really should also apply to the books chosen as references-and articles quoted.
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