VOL. XCIV, NO. 247
BOOK BREAKDOWN
NO ADVICE
Intermediate · 2020
Value Investing: From Graham to Buffett and Beyond
by Bruce C. Greenwald, Judd Kahn, Erin Bellissimo, Mark A. Cooper, Tano Santos · Evergreen
A practical valuation system that starts with asset value and earnings power (no-growth), then adds franchise/growth only when there is a defensible competitive advantage, plus a research and risk-management playbook to avoid permanent loss.
Level
Intermediate
Strategies
4 types
Frameworks
7 frameworks
Rating
Target Audience
Ideal Reader
- Investors who want a repeatable valuation method beyond simple multiples
- Anyone trying to connect business strategy (moats) to valuation
- Stock pickers who prefer to avoid bad information (far-out forecasts) and anchor on what is knowable
- People who want a structured process: search -> value -> research strategy -> risk management
May Not Suit
- Day traders / short-horizon traders
- Investors looking for a pure accounting textbook or a pure DCF textbook
- People who only want "what to buy" lists instead of a method
Investor Fit
| Strategy | Value Investing · Quality Investing · Growth Investing · Portfolio Management |
| Time Horizon | Long-term (5+ years) |
| Asset Focus | Equities · Multi-Asset |
| Math Level | Algebra |
| Prerequisites | Comfort reading income statement + balance sheet · Basic corporate finance terms (WACC, ROIC, reinvestment, leverage) · Willing to do industry/competitive analysis (moats are not optional here) |
Key Learnings
- 1Three-layer value stack: asset value (replacement cost), earnings power value (no-growth), and franchise/growth value only when justified
- 2Earnings power valuation anchors on sustainable current earnings and cost of capital, not heroic long-term forecasts
- 3Competitive markets tend to push ROIC toward the cost of capital; persistent excess returns imply barriers to entry (a franchise)
- 4Growth is not automatically valuable; growth is valuable only when reinvestment earns returns above the cost of capital
- 5For growth stocks, point-estimate intrinsic value is often fake precision; think in return scenarios and require clear franchise evidence
- 6Searching for value and having a research strategy matters as much as valuation math (where you spend your time is a competitive advantage)
- 7Risk management is inseparable from security selection; the goal is to reduce permanent loss, not to "be right" in every name
Frameworks (7)
Formulas (4)
Case Studies (4)
Hudson General
Takeaway
Asset valuation example: moving from book value toward replacement/reproduction cost to anchor downside.
Magna International
Takeaway
EPV example: normalize earnings for a real-world business and value it under no-growth assumptions.
WD-40
Takeaway
Franchise example: a small, durable niche can create value beyond assets via persistent pricing power and customer captivity.
Intel
Takeaway
Franchise + growth example: separate earnings power from growth expectations and focus on competitive dynamics.
Mental Models
- —Triangulation: asset value <-> earnings value as anchors, franchise as the (hard-earned) add-on
- —Good information vs bad information: prefer stable, observable inputs over long-range forecasts
- —Competition as gravity: without barriers, excess returns fade
- —Franchise = barriers to entry + customer captivity + durable economics (not vibes)
- —Growth creates value only when ROIC > WACC (otherwise it destroys value)
- —Return-based lens for growth: what return do you earn at this price under plausible paths?
- —Specialization / circle of competence matters more when valuing growth or disruption-heavy industries
Key Terms
No glossary terms documented for this book.
Limitations & Caveats
Keep in mind
- •Replacement/reproduction cost estimation is judgment-heavy and can be hard for intangible-heavy businesses
- •EPV can mislead when the business is at peak margins or structurally changing
- •Franchise valuation depends on correct moat assessment; this is the hardest part and requires real industry knowledge
- •For high-growth businesses, the approach pushes you toward scenario/return thinking because precise intrinsic value is not reliable
Reading Guide
Priority Reading
- Valuing assets (replacement cost)
- Earnings Power Value (EPV)
- Growth (how to think about it without fake precision)
- Valuation of franchise stocks (moats + returns)
- Research strategy and risk management chapters
Optional Sections
- —Investor profiles if you only want the valuation system (they are useful, but optional for the core method)
Ratings
Concept Tags
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