Some of the books I've been asked to review I just had to decline because they were either so badly written or so convoluted and complicated that I saw no use of the book by the average reader. One series of books and DVDs sent to me by a penny stock promoter were so poorly produced and contained so many wild proposals that I thought new investors would loose a bundle following bad advice.
Although now I consider myself a Momentum Investor, I started out my career in Public Accounting after completing a degree in Accounting and Business Administration at Berry College. As an accountant I loved reading annual reports and looking at fundamentals. I soon noticed most of my fellow CPAs so over analyzed companies that they never made any money investing themselves. Most of the mutual funds had highly educated and highly paid analysts that had all the data and computer tools available but still couldn't beat the markets.
I have been a Value Line subscriber for many years and before that poured over issues at the library. One of the screens that always fascinated me was the Highest Growth Stocks screen. As Value Line puts it "To be included, a company's annual growth of sales, cash flow, earnings, dividends and book value must together averaged 10% or more for the past 10 years and be expected to average at least 10% in the coming 3-5 years.". This seemed to be the only list of stocks I would ever need.
What fascinated me about the list is that my head told me these are the stocks I should own but it seemed as many of the stocks were going down as were going up. What was the difference?
Well, Vitaliy explains the missing component in his book: Price Earnings Ratios. His analysis of why price earnings compression is so important is worth the price of this book.
The Chapter 12 -- "Applying Darwinism to the sales process" is some of the best 14 pages you will ever read.
His ideas on Total Return with the combination of price increases and dividends is an idea missed by most technical analysis followers.
He goes into detail about the risks associated with the opportunity costs of staying in cash; another point missed by most of the mutual fund portfolio managers.
There are several things you will have a much better understanding of after reading this book:
- How do I evaluate the P/E ratios of the economy, the industrial sector and the individual stock?
- How do I tell if the stock is a bargain or is about to run out of steam?
- When should I sell and protect my profits?
- Once I sell should I jump back in the market or sit on the side?