My recommendation is to buy Stephen Penman's textbooks Financial Statement Analysis and Security Valuation. I've re-read it and poured over it years to squeeze every last drop of wisdom. The book is challenging, but it WILL make you money if you are interested in investing. I would say it's the best book I've ever read/worked through on the topic of investing and financial analysis.
@@shtookaralph5205 Hi there, I encourage you to embrace the struggle. I too struggled with the material, and it took me far longer than I would have liked to assimilate the material. But in the process I realized that I was actually learning the concepts bit by bit. One tiny fragment at a time. In fact, I've been through the book several times and it was so full of notes to myself (to explain a line or two of the text) and highlighting that I ended up getting a second copy of the textbook so that I had a clean copy that I could read through. Incidentally, don't feel that you've somehow failed by not getting through the material quickly. I'm self taught and it routinely takes me a lot longer to get through the material, but in the process you are interacting with the material which is the essence of learning. Maybe there are some people who can whip through material like this quickly, and to that I say, "good for them" but learning is a very individual journey that takes time, and you have to "play with the concepts" when somebody is not standing over your shoulder telling you what to do. But in the process you learn a lot more. There is one good source of videos by Dr. Matthew Gross on RUclips who teaches the concepts outlined in Penman's Text Book. It will help you a lot. www.youtube.com/@drmatthewgrosse122 One last piece of advice. The most challenging part of Penman's system is applying it to real life. This is not because Penman's methods are wrong, but because you are dealing with the accounting of many different companies which can be quite ridiculously bad. (Omitted information. Statements that don't add up. Contradictory statements.) In the real world life is messy. But eventually you will learn ways to either ignore or paper over the blatantly wrong or contradictory financial statements. Either way it is the struggle that will teach you how to deal with the problems you encounter in financial analysis. Financial analysis is as much an art as it is a science. Good luck!
The thing they don't teach you, is that B/P works ON AVERAGE because of the few stocks that shoot up, while MOST of the actually FAIL. The distribution is heavily skewed with the bulk of returns being negative and a long "tail" of outperformers. So if one wanted to capture the B/P effect, one would have to invest in all the stocks with a high B/P, or at least a very large chunk of the high B/P universe. This makes it a hard-to-implement, if at all possible, strategy.
Columbia Business School has the worst cameramen/directors ever. They need to focus more time on the projections on the screen whenever the lecturer refers to them. Following him around is like following a fly. It's a distraction.
He is saying that by betting on high B/P and E/P you end up buying a more riskier investment. He proved that using some accounting principles. Most of the video explains the numbers behind the statement.
Very nice lecture. I had to pause and play many times to actually think about it. Value vs Growth are merely labels and are not really useful in investing, and are only useful as a reference during conversation in order to have a common reference. Accounting doesn't write potential profitability only concrete profitability due to accrual accounting methods, and other conservative methods. Technology companies are hard to evaluate. I am not an accountant but I wonder what GAAP vs IFRS would do to the evaluation of certain companies.
TL;DR; value is riskier. It has had a higher historical return because it happened to pay off positively. If you invest in value stocks you take on more risk which you may or may not be compensated for. A much simpler explanation than he gives is that the price is lower than other stocks given future expected earnings therefore it must be riskier. If it wasn’t, people would be willing to pay more to own it.
My recommendation is to buy Stephen Penman's textbooks Financial Statement Analysis and Security Valuation. I've re-read it and poured over it years to squeeze every last drop of wisdom. The book is challenging, but it WILL make you money if you are interested in investing. I would say it's the best book I've ever read/worked through on the topic of investing and financial analysis.
Agreed it is a very hard read, I've been struggling to read it, but you gave me extra motivation to do it.
@@shtookaralph5205 Hi there, I encourage you to embrace the struggle. I too struggled with the material, and it took me far longer than I would have liked to assimilate the material. But in the process I realized that I was actually learning the concepts bit by bit. One tiny fragment at a time. In fact, I've been through the book several times and it was so full of notes to myself (to explain a line or two of the text) and highlighting that I ended up getting a second copy of the textbook so that I had a clean copy that I could read through.
Incidentally, don't feel that you've somehow failed by not getting through the material quickly. I'm self taught and it routinely takes me a lot longer to get through the material, but in the process you are interacting with the material which is the essence of learning. Maybe there are some people who can whip through material like this quickly, and to that I say, "good for them" but learning is a very individual journey that takes time, and you have to "play with the concepts" when somebody is not standing over your shoulder telling you what to do. But in the process you learn a lot more.
There is one good source of videos by Dr. Matthew Gross on RUclips who teaches the concepts outlined in Penman's Text Book. It will help you a lot.
www.youtube.com/@drmatthewgrosse122
One last piece of advice. The most challenging part of Penman's system is applying it to real life. This is not because Penman's methods are wrong, but because you are dealing with the accounting of many different companies which can be quite ridiculously bad. (Omitted information. Statements that don't add up. Contradictory statements.) In the real world life is messy. But eventually you will learn ways to either ignore or paper over the blatantly wrong or contradictory financial statements. Either way it is the struggle that will teach you how to deal with the problems you encounter in financial analysis. Financial analysis is as much an art as it is a science. Good luck!
Priceless wisdom! So good to see Sir Stephen in 2017. Please, keep posting in future.
The thing they don't teach you, is that B/P works ON AVERAGE because of the few stocks that shoot up, while MOST of the actually FAIL. The distribution is heavily skewed with the bulk of returns being negative and a long "tail" of outperformers. So if one wanted to capture the B/P effect, one would have to invest in all the stocks with a high B/P, or at least a very large chunk of the high B/P universe. This makes it a hard-to-implement, if at all possible, strategy.
You nailed it! :-)
Well said
I suppose a low-cost value index fund would get the job done.
Columbia Business School has the worst cameramen/directors ever.
They need to focus more time on the projections on the screen whenever the lecturer refers to them. Following him around is like following a fly. It's a distraction.
And sooooo....
What is a value trap and how do I avoid it?
Re-watch the video again.
He is saying that by betting on high B/P and E/P you end up buying a more riskier investment. He proved that using some accounting principles. Most of the video explains the numbers behind the statement.
Thank you for the lesson.
Mm-kay?!!
Thanks for the update on the same lessons
I am deeply enamored by his academic acumen!
Very nice lecture. I had to pause and play many times to actually think about it. Value vs Growth are merely labels and are not really useful in investing, and are only useful as a reference during conversation in order to have a common reference. Accounting doesn't write potential profitability only concrete profitability due to accrual accounting methods, and other conservative methods. Technology companies are hard to evaluate. I am not an accountant but I wonder what GAAP vs IFRS would do to the evaluation of certain companies.
“What do we do when we fall Mr. Wayne? M’kay? We learn to pick ourselves back up. M’kay?”- Alfred from Batman
what's water on the balance sheet?
goodwill and intangibles.
bullshit
TL;DR; value is riskier. It has had a higher historical return because it happened to pay off positively. If you invest in value stocks you take on more risk which you may or may not be compensated for.
A much simpler explanation than he gives is that the price is lower than other stocks given future expected earnings therefore it must be riskier. If it wasn’t, people would be willing to pay more to own it.
Why a heck terminology is inverted, is that an intellectual game? Great content but one has to figure out the inverse of all he says! P/E and P/B!
Simple. It's the reciprocals. If it is 30% empty, it is 70% full.
Who's the lady at 28:50? I may have found ... ❤
Sir, just want to say thanks for the video, and this could have little better. Though, I'm a finance student but I was feeling left out.
Nice lecture 🙏
Isn't growth and value a chain reaction, one or the other happens first then the other steps forward with the other?
You can buy assets at a discount and later sell them at full price for a profit with no growth, or even a decline in earnings. Known as P/E expansion.
Can someone do the TL;DW version here? Thanks.
13:50 how is 8.7 the reciprocal of 11.5?
I think because the yield at P/E of 11.5 is 8.7%. If PE is 11.5/1, the reciprocal is 1/11.5 = .0869 or 8.7%
yes, with a 11.5 pe you would have 8.7% return in an investment.
They changed accounting standards to capitalize R&D now, so it is an asset on the balance sheet.
mhmm
Soooo... what do I do to appropriately and more profitably make value investments?
Good stuff.
thanks for the video
It's a good idea value and intesting
nice talk
Mmmhmm!!
Love it!
great lecturer
This man is an accountant, not an investor.
When you dissociate the two, you, my friend become neither an investor nor an accountant but a gambler.
@@garhhh9513 idiot
@@garhhh9513 Goodluck retiring without investing your money and it being eaten away by inflation lol
@@garhhh9513 Your comment was extremely insightful, but it seems your audience wasn't having any of it.
Didn’t expect an Aussie accent
This guy sounds like an Aussie
His bio says he hid his undergraduate study at the University of Queensland
Well, I wanna see his track record... Otherwise it's just "interesting" but nothing more.
Uh uh
Dude can't control the volume of his voice.
That’s how they used to give lectures to keep you awake. They tell every 4 minutes.
Never trust accountants. Those numbers are available to everyone. Useless lecture for retail investors.
Umm ummm ummm ahhhh umm ahhh
I can't listen to this anymore, had to turn off the video 2 minutes in
Turn subtitle on and speed up the video
An excellent writer and a terrible lecturer. The way he speaks to the audience, you'd think it was a kindergarten (perhaps that's how he sees it).