Monday, 2 March 2009

Book Review: The Uncommon Investor III by Benj Gallander

This book is about value investing in individual stocks. It supposedly tells you how to buy low and sell high. But I'm not too sure who author Benj Gallander of the Contra the Heard newsletter had in mind as the audience for this book because it falls in a no man's land. It is too simple to be of real use to someone seeking to become a stock investor according to the principles the book itself espouses, which are primarily those of fundamental analysis. As Gallander says on page 127, "Learn to understand financial statements. If you're not willing to do this, then leave stock picking to the experts." I am sure he would not advise anyone to actually buy stocks based on the very elementary introduction to income statements and balance sheets in the book and I am also sure that his own stock picking success is based on a far deeper understanding of financial statements.

Similarly his use of the actual Contra the Heard newsletter stock picks as examples falls short of providing real insight. The buy-sell decisions are explained in a few lines but again, I am sure he sifted through loads of information and data before deciding what could be ignored and what were the critical factors. My own feeble attempts to do such analysis inevitably encounter conflicting information that cast doubt on the attractiveness of a particular stock. It sure ain't easy or simple to do. The investing rules he lists throughout the book, most of which are quite mainstream, frequently will give different signals. So which do you accept as being predominant and which do you ignore?

The text is in the form of a narrative where a family and friends have gathered in a home to watch the final game of the baseball world series. One of the people is a financial advisor named Joan who explains the Contra philosophy using baseball analogies as the game unfolds. Maybe some will enjoy that approach but it got very annoying a hundred pages on. Arrgghh! There's only so far one can stretch an analogy! Besides, as my wife discovered again Saturday ("Her: Did you hear what I just asked you? ... Me: Huh?" - I think it's one of those "men are from Mars, women are from Venus" things) while watching Scotland beat Italy in rugby (!) it is kinda hard to pay attention to other things during a good game. "Joan, will you let me watch the game!"

I did enjoy reading that one should call up company management to ask questions and get a feel for their capabilities. Sounds like fun, must give it a try. Some of the Contra newsletters from the past, reproduced in an appendix make interesting reading today as a number of comments were spot on. It seems they are all available on the Contra website for free, so have a look.

Given the intelligence and insight of the author, evident in those newsletters and in the success of the investment returns stated on the same website, the book is disappointing. My rating is 2 out of 5 stars.

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