A Random Walk Down Wall Street - Burton G. Malkiel

[Valuebo]

I just read the first 120 pages and then, after being suprised by more than one bizar statement, started cross-reading some parts in the book which I was interested about.

 

I was warned by the title but I believe I saw it mentioned here more than once so that is probably the reason I bought it.

 

Some examples of what I read:

 

Fundamental analysis, according to him, is based on estimating future growth,  dividend payout and its growth and the risk a company bears. Obviously it is not really hard to rebut the value of such an approach as he does when claiming beating the market is near impossible to do, even for the pro's. To prove his assertion he shows a list of mutual funds beating the market during the internet boom because they took higher risk (which he believes is beta...).

 

Furthermore, according to Malkiel, predicting where market beating fund managers will come from is impossible to guess. Yet he claims to have read The Intelligent Investor, which in newer editions, if my memory serves me right, oddly enough goes into detail showing how many of the market beaters come from the value investing background of Columbia Business school where value investing is learned based on the teachings of Graham & Dodd.

 

Also, he literally advices to buy stocks "with the kind of stories of anticipated growth on which investors can build castles in the air" and more of that crap.

 

Lastly I found it funny that he doesn't want to share exactly how succesful he has been as an investor because it is a peculiarity of the academic world that a professor is not supposed to make money.  8)

 

I haven't read the whole thing so maybe I am exaggerating what he effectively means as it is possible he softens his statements in later chapters. Anyhow, from what I have read so far, I wouldn't recommend this book to anyone, even if they had very little knowledge about investing. There are far better books for increasing your actual knowledge about the subject that sell less bs or at least don't twist facts to "prove" a statement.  :-X

 

Maybe there are specific chapters that others here could recommend that actually provide some great insight? It could always be that I accidentally just read the lesser parts of the book...

 

 

[NormR]

I credit him with killing the EMH/CAPM for me.  After spending chapters on building up the theory he included a plot of beta vs return than showed the theory to be wrong - and not by just a little bit.  It didn't seem to stop him much, but, for me, when theory meets reality, reality wins. 

[Packer16]

I agree.  I think the Intelligent Investor version he is referring to is the latest with Jason Zweig's notes.  These notes are helpful for those who want to put money in "stocks" with no research.  In my opinion, it is ironic that whoever owns the rights to the Intelligent Investor has hired an efficient markets guy to write notes on an iconically value oriented work.

 

Packer 

[twacowfca]

I agree.  I think the Intelligent Investor version he is referring to is the latest with Jason Zweig's notes.  These notes are helpful for those who want to put money in "stocks" with no research.  In my opinion, it is ironic that whoever owns the rights to the Intelligent Investor has hired an efficient markets guy to write notes on an iconically value oriented work.

 

Packer

 

Zweig spoke at the big CFA conference last year.  I was surprised to hear him say that he didn't own any particular stocks, although he did I think own index funds.  He sat on the stage with Klarman who is a living testimony that careful value investing works, and Zweig seem to share that view.