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Investment Philosophies: Successful Strategies and the Investors Who Made Them Work (Wiley Finance) Hardcover – 14 Aug 2012

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From the Inside Flap

Choosing the right investment philosophy is the heart of successful investing. To make the choice, though, you need to look within before you look outside. In the Second Edition of Investment Philosophies, New York University Stern Business School Professor Aswath Damodaran will help you do this by going beyond the simple explanations of traditional and alternative investment strategies to discuss the individual underlying philosophies that support these techniques.

This reliable resource skillfully explores many of the time–tested investment philosophies that have allowed investors to reap financial rewards over the years, including value investing, growth investing, technical analysis, market timing, arbitrage, indexing, and more.

Along the way, it exposes you to a wide array of investment philosophies so as to give you a sense of what drives investors in each one, how they attempt to put these philosophies into practice, and what determines ultimate success. Author Aswath Damodaran also supplies you with the tools the definition and measurement of risk, the notion of market efficiency and how to test for inefficiencies, and the components and determinants of trading costs and empirical evidence for you to make your own judgments on the investment philosophy that fits your specific investment goals and views of how markets work.

Filled with valuable insights and useful formulas, this book provides you with the information you need to pick an investment philosophy that is right for you. With the Second Edition of Investment Philosophies as your guide, you can enter the markets with confidence and exit with profits.

From the Back Cover

Praise from the first edition of Investment Philosophies

"Damodaran is a well–informed scholar with a gift for organized, clearly written syntheses of complex topics in modern finance. With Investment Philosophies he provides the uncensored facts about winning in the marketplace. If you are a fund manager, an investor, or simply a student of finance, you will want to read this book."
Tom Copeland, Managing Director of Corporate Finance, Monitor

"Professor Damodaran has zeroed in on the most important missing element of many investment management processes: a clearly defined investment philosophy which can serve as a beacon in difficult markets. He offers a cornucopia of philosophies and strategies that have worked for many of the most successful investors, and which have stood the test of time."
Rob Arnott, Chairman, First Quadrant, LP; Editor, Financial Analysts Journal

"As an investor, I always have to look back to my philosophy and strategy for taking risk and making money. This book is an invaluable aid for ′taking stock′ before buying stock. It lays out the concepts and tools for understanding the basics of risk and return in the stock market, and presents a framework for any investor to construct his or her own investment philosophy."
Mitch Julis, Managing Partner, Canyon Capital Advisors

Inside This Book (Learn More)
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Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
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0 of 1 people found the following review helpful
great book 20 Jan. 2015
By Ernesto A. Uson - Published on
Format: Hardcover Verified Purchase
great book
14 of 30 people found the following review helpful
Of No Practical Value 27 Jun. 2013
By DudeMan - Published on
Format: Hardcover Verified Purchase
When you notice a huge error in one specific portion of a book it is hard not to imagine there are loads of others, either intentionally, by the simplicity of the approach used, or - most likely - the ignorance of the author in question, no matter how distinguished the author.

The reference I'm talking about gives an almost sublime and laughable short summation of one of the greatest stock investors our time - Peter Lynch - who you might think would be a centerpiece about a book on investment philosophy given both Lynch's track record and three books and magazine articles whose primary aim was clearly to teach an approach and inform on a very practical basis. Yet, the author of this book reduces Lynch the investor and approach to nothing less than ridicule by simplification - loads of research material individual investors can used in all of Lynch's material is boiled down into short contradictory nuggets that make ZERO sense if you've actually taken the time to both read and understand and APPLY the source material.

This is not an exact quote - you can read it yourself in the book but I'm going to quote the gist:

(If WEB is the icon for value investors, Peter Lynch occupies a similar position for growth investors....During that period, Lynch also helped to dispel the notion that growth investors were incurable optimists who bought stocks on promises. He introduced the rigors of value investing to growth investing...Looking at his writings you can summarize his views on growth investing in the following maxims:

1 - numbers matter than that stories
2 - it takes far more work to and effort to monitor a growth company than a value company
3 - you have to take a stand early in a growth company's life to make profits
4 - you need to be patient
5 - good growth companies are rare, and finding one good growth company may require you to research a dozen or more companies)
page 356 - read it yourself

My comments:

- this author didn't either didn't READ Lynch's works or took oddball notes or simply didn't bother to pay attention. If he had, then this passage is particularly revealing in One Up would have revealed the fallacy of his comments:

"Some people ascribe my success to my having specialized in growth stocks. But that's only partly accurate. I never put more than 30 to 40% of my fund's assets into growth stocks. The rest I spread out among the other categories described in this book. Normally I keep 10 to 20% or so in stalwarts, another 10 to 20% or so in cyclicals, and the rest in turnarounds....I'm constantly looking for values in all areas, and if I find more opportunities in turnarounds than in fast growth companies, then I'll end up owning a higher percentage of turnarounds."
Chapter 16

An icon of growth investors? Really? Consider that one of Lynch's most profitable investments was in Ford - you know, cyclical Ford, apparently that great American "growth stock". This is a growth stock? I'm sure those WHOOPs bonds Lynch made a killing on were classified as 'growth' investments too. Sure! And all those S&Ls that came across Lynch's desk that he would buy again and again and felt so passionately about he wrote numerous articles on the topic in Worth. Those were traditional 'growth investments?' Course, those REALLY were growth investments at times but this hardly fits the category defined by the author of this investment book. Again, how can you say this if you've actually taken the time to read any of Lynch's materials?

Lynch represented the synthesis of many different investment approaches. He was both growth and value combined (turnarounds in combination with cyclicals in combination with fast growers), an approach that was surely aided by his position as "HEAD OF RESEARCH" before managing Magellan and being the focal point of the combined resources of the mighty Fidelity organization of the 1970s to early 1990s. In other words, if Lynch wanted to understand an industry, he had the resources and contacts to understand an industry - this makes him entirely different than most investors of his time or professors trying to write books. He was also clearly so analytical as to structure his approach to follow well-ordered checklists that clearly describe how he picked stocks in each category (this is called developing maxims that work thru sheer repetition, not imagination). As an aside, practitioners know that Benjamin Graham "relatively unpopular larger company' as a fertile field of study represents the same approach Lynch described with stalwarts. Lynch did it all, and to reduce his contribution to such narrow confines did him a huge injustice, especially as it suggests that - ultimately, and this is my interpretation - there is little to learn from reading Lynch's material. After all, this author gives him half a page.

But what do expect from this book? Is this author a practitioner? I honestly don't know, but if you going to read this book be sure to make your own conclusions. If you don't believe me, read Lynch's books - they aren't out of print and they will refute this author's summation of Lynch's importance in developing an investment philosophy in a few skinny minutes. I honestly can't fathom what this author was thinking.

All this said, maybe the rest of the book will live up to my expectations - a balanced HELPFUL approach to developing an investment philosophy or better yet refining one that already works or simply giving the reader something unique to think about - but geez....what a mess to deal with before you get far in. And yeah - I'm a Peter Lynch fan. Those simple books and articles that this author didn't get changed my life. One Up on Wall Street lays out both theory and practicality of how to invest while Beating contains real-world examples of actual stock picks, complete with industry specific criteria to determine what is important and what is not. If that wasn't enough, Lynch did extensive follow-ups on specific industry and investment topics that often grew into multi-part articles. In essence, Lynch revealed trade secrets that anyone who wants to become a better investor can learn from.

Bottom line - if you are going to develop an investment philosophy, you start with the person with both a verifiable track record, a long description of specific methods complete with checklist after checklist, and you do your best. This author misses that entirely and given his august reputation it is almost unfathomable.

Course, this reviewer picks stocks for a living. I know the value of Lynch's work, and I know how freely it is given. You don't take a gift like that cheapen it in this way. I would not have felt this strongly (and post this review) if I hadn't been this disappointed.


By the way, there is at least one glaring ERROR in the section on Warren Buffett too - on pg 266, the author references the various tenets from Warren Buffett's philosophy and refers to Lowenstein's book on Buffett. This author has the WRONG book - that discussion appears in Hagstrom's Warren Buffett Way, NOT the Lowenstein book. I'd call this inexcusable but it certainly leads one to the impression that author doesn't know about the subjects he is writing about (did this reference appear in the previous edition too?).


Couple notes - on the bright side, there IS some sorta-interesting stuff in here. This book is one of the few that addresses the cause of a bid-ask spread (though if you trade stocks this falls in the realm of 'interesting' rather than helpful unless you've never had a brokerage account before), it has some rehashes of the behavioral finance theory, and there are various summations of many aspects of investing but I can't help but think that it all misses the point. In the end, at least as far as the individual is concerned, you learn a philosophy by what works and endeavoring to stay in that area, trying to improve all the time- and you won't learn what works for someone who is clearly academic rather than practitioner. I'd rather read Lynch but you knew that already.
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