"Common sense is the heart of investing and business management. Yet the paradox of common sense is that it is very uncommon." So begins Lawrence Cunningham in How to Think Like Benjamin Graham and Invest Like Warren Buffett, an unflinching look at how to accomplish the two things investing titan Warren Buffett argues every investor must know in order to invest wisely and profitably: how to value a business and how to think about markets and market prices. Cunningham, author of the best-selling Essays of Warren Buffett, shows how most investors approach investing and the markets full of empty questions, in fact seeking answers to questions that have little or no meaning or actual relevance to performance. He shows that most investors do a lot of guessing and a lot of hoping, when what they really should be doing is approaching the markets business analysts. How to Think Like Benjamin Graham and Invest Like Warren Buffett will help readers develop the mind-set that will be the foundation to successful investing. Packed with attitude, the book begins with a no-holds-barred critique of the idea that the stock market is efficient in the sense of accurately pricing value.
The author then reveals the three things an investor has to get from financial statements, illustrating how managers play games with numbers -- a longstanding form of deception often to the detriment of investors. Cunningham then argues that an essential element of intelligent investing is a common-sense ability to assess the trustworthiness of corporate managers, and gives investors the tools to find business managers (like Jack Welch and Michael Eisner) who are trustworthy. Above all, Cunningham provides investors with the tools they need to thoroughly value the businesses in which they might invest, with examples of valuation using today's hottest companies: GE, Microsoft, and Amazon. In How to Think Like Benjamin Graham and Invest Like Warren Buffett, readers will learn; Why the efficient market hypothesis is only 80 percent true; When to trust managers and CEOs; Why earnings management and accounting manipulation can be the investor's worst enemies; Elegantly-woven and highly-accessible, the book shows readers how approaching investing as business managers will shatter the many myths of investment lore.
Cunningham gives readers the keys to analyzing businesses and making wise investment choices, helping them build solid portfolios of solid companies. The book was ranked one of the best business books of the summer in 2001 by J.P. Morgan.