Tuesday, December 05, 2006

Morningstar's Guide To Stock Valuation - Book Review

The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

What Is It About?

Morningstar provides analysis of stocks as well as mutual funds. This book provides an overview on how Morningstar approaches its analysis and valuation of stocks. The book describes how to read a financial statement, how to evaluate a company for a competitive advantage, and how to do a discounted cash flow analysis.

What Did I Get Out Of It As A New Investor?

As mentioned, this book provides tools on how to perform a valuation analysis of stocks. The book does this in an easy to understand manner. The best part of the book comes in the second half. There the book examines the various sectors that stocks are classified. The book discusses what performance indicators are important to each industry and how to compare valuation across sectors, adjusting for differences, as not every valuation technique works for every industry or sector. As a new investor I think this is a book people should pick up and read to understand how to read a financial statement, value a company, perform a fair value analysis, and understand how sectors function. It is more advanced than The Little Book of Value Investing but less textbook like than Value Investing.

The Good News

The book provides a straight forward way to perform a fundamental valuation analysis. This is a good book to develop an understanding on how to go about a valuation process.

The Bad News

The book provides solid and informative introductory material for the new investor on fundamental analysis but only refresher material for the more experienced investor.

The Bottom Line

Those looking for a book that covers all aspects of fundamental analysis in a straightforward manner will not be disappointed in purchasing this book.

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1 comment:


Excellent book for beginners.