The 5 Keys to Value Investing

by J. Dennis Jean-Jacques

Overview

How to determine what stocks are really worth­­ and buy the best at a discount

"The Five Keys to Value Investing is practical, insightful, and a great roadmap to not only value investing but how to make money in the stock market."—Joel Greenblatt, Managing Partner, Gotham Capital

"Jean-Jacques has written a great how-to guide for both beginning and experienced value investors. He skillfully draws on the canon and legacy of the great value investors, such as Graham and Buffett…a terrific addition on this time-tested methodology."—Eric T. McKissack, Vice Chairman, Ariel Capital Management/Ariel Mutual Funds

Investors left to pick up the pieces of the shattered stock market are rediscovering value investing­­ the time-tested technique based on assessing and buying businesses as opposed to "picking" hot stocks. The Five Keys to Value Investing provides a methodical framework for using value analysis to uncover investment opportunities based on their business strengths, and building a solid portfolio of stocks that is destined to provide superior long-term returns.

Written by a professional value investor who worked for the best, The Five Keys to Value Investing explains how to answer the four basic questions of value investing:

• Does this stock represent a good business to own?
• What is its balance between price and value?
• What specific events will spur it to appreciate?
• What are the stock's safety levels?

Product Details

ISBN-13:	9780071416078
Publisher:	McGraw Hill LLC
Publication date:	10/22/2002
Sold by:	Barnes & Noble
Format:	eBook
Pages:	208
File size:	2 MB

About the Author

J. Dennis Jean-Jacques is a former senior analyst with Mutual Series Funds. His work has been featured in top financial publications including Barron's, Fortune, and Business Week. Prior to joining Mutual Series, Jean-Jacques--who received his MBA from Harvard Business School--was an investment analyst at Fidelity Management & Research Company, adviser to Fidelity mutual funds.

Table of Contents

	Acknowledgments	ix
	Introduction: Value Matters	xi
1	The Mind of the Value Investor	1
	The Essence of Value Investing	2
	The Seven Fundamental Beliefs	9
	The Five Keys of Value Framework	16
	Putting It All Together: Revisiting Varian Associates	19
2	Business and Industry Assessment	25
	Buying Businesses Versus Speculating on Stocks	25
	Understanding the Business	28
	Three Approaches to Analyzing a Business	36
	Business-Quality Red Flags	44
	Assessing Management	45
	Assessing a Business: Herman Miller, Inc.	46
3	Price and Value Assessment	51
	To Appreciate Price Is to Understand Value	52
	Assessing Value: Tools to Consider	53
	Valuing Herman Miller	71
4	Catalyst Identification and Effectiveness	77
	Catalyst Defined	77
	Potential Catalysts	79
	Management Unlocking Value At Thermo Electron Corporation	92
5	The "Margin of Safety" Principle	99
	What Is Margin of Safety?	99
	Quantitative and Qualitative Reasoning	101
	Risk and Uncertainty	108
	Maytag Corporation: Finding a Safety Level	111
6	Assessing the Investment Opportunity	121
	Value Investing and the Game of Golf	121
	Identifying the Opportunity	122
	Applying the Five Keys of Value to Fit the Opportunity	124
	Cyclical Companies	135
	Hybrid Opportunities	144
	Avoiding Value Traps	144
7	Buying Right and Being an Owner	145
	Ownership Is a Verb When Monitoring Your Investments	153
	Buy and Hold, But Not Forever	166
8	Generating Value Ideas and Building an Independent Portfolio
	Generating Value Investment Ideas: Turning Over Every Stone	168
	Building Your Portfolio	177
Appendix A	Business Assessment Tools	181
Appendix B	Analyzing Wall Street Analysts' Recommendations	185
Appendix C	The Critical Failings of EBITDA	194
Appendix D	Management's Plan to Restructure a Company	206
Appendix E	Descriptions of SEC Forms	213
	Index	227

What People are Saying About This

Joel Greenblatt

The Five Keys to Value Investing is practical, insightful, and a great roadmap to not only value investing but how to make money in the stock market.
— Managing Partner, Gotham Capital

McKissack

Jean-Jacques has written a great how-to guide for both beginning and experienced value investors. He skillfully draws on the canon and legacy of the great value investors, such as Graham and Buffett...a terrific addition on this time-tested methodology.
— Vice Chairman, Ariel Capital Management/Ariel Mutual Funds