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Titles Worth Your Summer Time


Individual investors in the Internet Age are blessed with information. We also are cursed with too much of the stuff, from real-time quotes to streaming videos of fund managers. This info-clutter extends to books, and cutting through it can be difficult, even dispiriting, when you see how little thought goes into so many books.

That's why I've spent part of the summer doing it for you (table). And the new title most deserving of your time is Value Investing: From Graham to Buffett and Beyond. Its authors, Columbia Business School faculty members Bruce C.N. Greenwald and Michael Van Biema and fund managers Paul D. Sonkin and Judd Kahn, aim to place their work next to Benjamin Graham's 1950 classic, The Intelligent Investor. My 1986 edition came with Warren Buffett's endorsement--"by far the best book on investing ever written." Value Investing is better.

The trouble with Graham's book is that today such examples as Whiting Corp. seem antediluvian. Value Investing has fascinating contemporary cases, including Intel (INTC) and Microsoft (MSFT), plus an account of veteran value investor Michael Price's decision last year to short General Electric (GE). It also extends Graham's work by examining the variety of branches value investing has grown, and advises how to estimate such head-scratchers as the asset value of a company's research or the minimum capital spending a company needs to maintain operations.

No less practical for many investors will be Your Employee Stock Options by Alan B. Ungar and Mark T. Sakanashi, two Southern California financial planners. As options have spread, so have similar titles. This one, with a host of worksheets and a companion Web site, is the best I've seen. What are your options worth? Their real value "is not a number of dollars," say the authors. "It's what those dollars can do, the difference they can make in your life." With that idea at its core, this book shows how to use options to fund your dearest goals.

One goal we all share is minimizing taxes. Capital Gains, Minimal Taxes will help anyone from mutual-fund investors to day-traders. Kaye A. Thomas, a Chicago-area tax attorney, covers the topic so clearly that I came away with a good understanding of the cruel and too-usual punishment of mutual-fund taxes and the four brain-scrambling ways the Feds give us for figuring them. I plan on keeping this book close.

Taxes may be maddening, but it's our personal craziness that Washington State University finance professor John R. Nofsinger targets in Investment Madness. It mostly reiterates others' research into the psychology of investor behavior, noting such rampant frailties as overoptimism. But it also shows how to guard against them, and Nofsinger touches on his own study of how investors react to corporate news. One finding: Good news leads us to sell winners, while bad news fails to shake the losers out of our portfolios.

Explaining how to stay ahead of the news is Off the Record's burden. Craig Gordon, who runs a San Francisco research firm, tells how his crew does "marketplace-checking"--that is, talking to buyers and sellers to see which companies are doing well and which aren't. In 1999, Gordon saw unusually low candy stocks at his local Walgreen's. He got curious and soon learned Hershey suffered such severe software problems that it couldn't get orders shipped--this was just before Halloween--a screaming signal to dump the stock. Gordon rambles some, and his methods will strike most amateurs, unless they're in an investment club, as impractical. Yet testing Wall Street's expectations against the real economy is a sure, if uphill, path to profits.

A fresh approach is promised by a Harvard Business School Press book due in October. Expectations Investing, by Northwestern University emeritus professor Alfred Rappaport and Credit Suisse First Boston strategist Michael J. Mauboussin, suggests investors first gauge the expectations of future cash flow already built into a stock's price instead of forecasting future profits. Judging by an early version of this book, my autumn reading list is already filling up. By Robert Barker


Steve Ballmer, Power Forward
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