This article on the book title "Value Investing Today" by Charles Brandes (Author) was written by Net Net Hunter member Bryan Shealy. Bryan worked in the inventory business for 5 years which gives him an edge in net net investing. Article image under CC 2.0 by nattanan23, edited by Broken Leg Investing.
As a college graduation gift, my grandfather gave me an ETF.
I was 22 years old in 2008, a true millennial. A great year to graduate I know… but that’s another story. My grandpa told me that all I needed to do was hold this one ETF, forever. Just keep reinvesting the dividends back into it and watch it grow year after year. For years, I followed my grandfather’s advice. . . until I didn’t. Oops. The ETF was SPY, and looking back I realize it was sage advice.
Is value investing today under threat from millennial investment habits? What is all the hysteria about Initial Public Offerings (IPO), Bitcoin, and large capitalization stocks? So many of my investment peers seem to throw away their hard earned cash on speculation. Distrust of banks and government has led to this ignorance of good investment knowledge and habits. Value investing needs to make a comeback if this generation is to bring capital and liquidity to world markets.
Value Investing Today is a book written by Charles H. Brandes which seeks to bring value investing to a new generation. The book is designed to educate value investors using modern language and points out flaws in speculative thinking. This book is also designed to entertain and motivate, its tone geared toward discovery along with supporting studies. I could barely put this book down - I read it so fast I thought the virtual pages would catch fire!
So… What’s So Great About Value Investing Today? (The Good)
Value Investing Today does an excellent job zeroing in on why value investing works. I especially enjoyed the international portion since I find other authors tend to neglect markets outside of the US. Brandes explains why international investing is so necessary for a modern portfolio.
“We’re sometimes reluctant to place our trust and dreams in the markets of countries that might seem better suited to wild-eyed speculators than prudent investors.”
(pg. 97)
Brandes’s buildup resonated with me and my passion for international travel. I suddenly felt like I could travel the world and see all it had to offer. The absurdity of the idea that international markets only present opportunities for speculators is striking. Global markets are starved for cash and capital, creating unbelievable value opportunities! Brandes does a great job at providing intrigue and supports it with data presenting why international investing is not just a way to diversify but is also incredibly lucrative.
Take a look at this quote from chapter 8, page 111: “Output from developing economies represents roughly 18 percent of global GDP, yet emerging markets are capitalized at just 4 percent of the aggregate value of the world’s equity markets.” This quote from Brandes is astounding! The undercapitalization of emerging markets suggests massive room for expansion and profits. As I explained above, these markets are starving for cash! This information alone would make any investor think twice before neglecting these incredibly cheap companies.
While the international portion of Value Investing Today provided a good introduction into the possibilities of international exposure, my favorite section was chapter 7 on Corporate Governance and the Value Investor. Brandes gets straight to the point, stating, “Basically, it [corporate governance] comes down to control over power and money.” If you’ve never thought about it before, think about it now - you own a piece of the company. You have rights as a shareholder and the company and have a great deal of interest in its success. Brandes points out the various ways a shareholder can interact with the company, the types of shareholders that interact with the company, and my favorite: shareholder activism.
If you have ever been frustrated watching a company make poor decisions, this chapter is definitely for you. I could go on and explain many ways I enjoyed in this chapter but I’ll leave it to you to pick up this book and learn how you can make a difference in a company you own.
Charles H. Brandes Value Investing Today Stops Short of Perfection (The Bad)
Have you ever invested internationally? I actually HAVE and it was easy! I utilized an international exchange traded fund (ETF). This allowed me to get quick and easy international exposure, but an ETF is no more than an index, and I wanted to know more. I was hoping Brandes would reveal the possibilities and provide me with a great explanation on how I could invest internationally beyond ETFs, but I feel he let me down somewhat.
Chapter 9, How to Invest in Companies Worldwide, does not seem to match the flow of the rest of the book. I couldn’t make sense of the various ways he explains how an individual can purchase foreign shares. Take a look at this odd sentence: “If it quacks like a duck, looks like a duck, and walks like a duck, it must be a duck.” Even in context, I’m not sure what he was trying to accomplish in this sentence. I believe he tried to use it as a way to illustrate the different investment vehicles, but again I’m not sure.
Brandes then goes on to explain the acronyms ADR’s, GDR’s and ORD’s. They stand for American Depositary Receipts, Global Depository Receipts, and ordinary shares, respectively. It would have helped greatly if he were to explain these different asset vehicles in a much less convoluted way… without ducks.
I just didn’t find what I was looking for in this chapter. Perhaps this is not solely the fault of the author but rather an illustration of just how fast international markets are developing. I would have at least expected ETFs to be explained, maybe with some back studies comparing the performance of international ETFs vs ORD’s. However, at the time this book was written, many of the ETFs I myself have invested in did not even exist!
Value Investing Today and Its Importance to Millennials (The Bottom Line)
Brandes’s Value Investing Today should be on the reading list for any millennial investor. This book does an excellent job of reiterating Benjamin Graham’s best ideas and bringing them into the 21st century. I’ve often found Benjamin Graham's examples and worldview a bit outdated but never knew where to look for a more modern take. Brandes translates Graham principles into the modern market environment and expands the approach to international markets as well.
Overall, I heartily recommend Value Investing Today. While chapter 9 was perhaps a bit too complex for me, hopefully anyone else reading the book can take more away from it. It is clear that the book is more focused on newer investors, with the aim of convincing them that value investing is a meaningful way to achieve extraordinary gains. However, I would also recommend this book to anyone looking for motivation to further their investment knowledge, as it does a great job creating excitement around investment in today’s world.
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