With 38 ratings
By: Joseph Belmonte
Purchased At: $7.46 (28 used & new offers)
Warren Buffett had it right all along. Now it's your turn to learn how to construct a portfolio that is sure to outperform the market averages, as well as almost every professional money manager in the world. Warren Buffett's method of predictability can determine a future target price, which in turn determines his all-important purchase price. However, Buffett doesn't draw conclusions of his predictability method relative to the future total returns of portfolios. That's where Buffett and Beyond comes in, taking Buffett's method one giant step beyond, proving that if you select a portfolio of stocks using the predictability method in this book, you will outperform 96% of professional money managers over the long term.
In addition to the information in the book, readers will have access to a password-protected website that includes tutorial videos, PowerPoint slides, free trial access to a video newsletter, and a trial subscription to the author's computer program, which follows the research presented in the book.
- Explains Clean Surplus Accounting (CSA) to determine Return on Owners' Equity (ROE)
- Uses CSA to determine ROE in a unique way to verify Buffett's all-important purchase price
- Draws conclusions between Clean Surplus Return on Equity and future total returns
- Shows that every portfolio selected from the S&P 500 index with above-average Clean Surplus ROEs outperformed the S&P average during the test periods from 1987 to the present
If you're an investor, this book will impact your financial life forever.
Since the technique uses as much history as possible to adjust the book from an initial accounting book value, people using this technique will end up with very different clean surplus ROE ration if they have 10 years of history versus 5 years.
The author claims that the clean surplus ROE produces better results for stock picking than the Accounting ROE. The tables in the book showed the clean surplus ROE for his stock examples, but it would have been nice to show the traditional accounting ROE in the table as well as the Dupont ROE ratio which uses a different formula which is the profit margin multiplied by asset turnover multiplied by the financial leverage..
The example portfolios were 8 stocks versus the DOW. I would have liked to have seen the results of four 8 stock portfolios selected thus:
- 8 Best Clean Surplus ROE (using 10 years of data)
- 8 Best Clean Surplus ROE (using 5 years of data)
- 8 Best Accounting ROE (using 5 years of data)
- 8 Best Dupont ROE (using 5 years of Data).
The Author said the 8 stocks with the Clean Surplus ROE outperformed the DOW, certainly, but would a selection of the top accounting ROE or Dupont ROE resulted in a similar portfolio of stocks ? Stocks with a high clean surplus ROE also tend to have a high accounting ROE so someone can easily end up with the same stocks using the accounting ROE. It's hard to know without a comparison of the 4 different ROE
One other aspect which I wonder about is buybacks. The author adjusts the oldest book value with retained earnings but buybacks is an outflow of money from the enterprise. So following buybacks, remaining share holders have a bigger piece of a poorer company. Is there an adjustment which must be made with buybacks or alternative with share dilution via the emission of new stocks ? There was very little said about buybacks.
To this extent the first sections of the book put me off because there was a hint of evangelism and ego. I am also wary of books that tell me how I can profit from a ‘secret’ because if I had identified ‘Buffett 1.1’ as a strategy I would keep it to myself and profit from it rather than tell everyone. I think of the adage ‘How to be a millionaire’ (by writing a book called …).
Having said that, this was a readable book that set out certain common sense but perhaps not immediately obvious extended thinking about value investing. I could have done without the ‘Of course, you know what I’m going to ask you’, ‘You see folks’ and ‘Let’s look once again’ style of writing, which was too chummy for me and some of the hype (‘the one fantastic thing about our index options’). What I like about Warren Buffett is that he writes in a very down to earth way without any pretention – and if anyone deserves to adopt a superior tone it is surely WB.
Overall, Belmonte offers some good ideas for the investor who has the patience to explore the fundamentals of companies, the time to research stock selection and enjoys the process. His ideas remain only part of the story for those who believe the market is irrational. However, for all my slight carping it was a relatively digestible book but convinced me that I am better off leaving the process to fund managers.
Thats good, but it is always I think, a weakness in the book. He takes 11 chapters and 80 pages to get this over to you. Really, one chapter imho would have been sufficient.
I have a problem with the tables, because time surely should flow down the page rather than up it? Thus you are presented with table after table which starts with lets say 1988 at the bottom and ends with say 2001 at the top. The tables flow, so a 1989 number is derived from 1988 numbers. I have never presented a spreadsheet like this in my life, but the author is a Phd and maybe he knows best. Its a small point, but kept niggling me.
Once you have got your brain around the key concept, various portfolio construction techniques are suggested by the author, some using options to enhance returns.
There is a website available. www.wiley.com/go/buffettand beyond... the password is in the book.... the page is returned not found, but a google search will get you to the correct place. Here if you want to use the spreadsheet constructed by them, and watch their videos, you will be invited to subscribe.
the book is good, and a clear albeit a bit long winded on the key concept, though for good enough reasons. And there is a clear exposition of how to construct a portfolio and get additional income by options or dividends. but if you want your hand held, you must expect to pay
it suffers from the same weakness as every other "system" based investment system.
If there were a sure fire way of beating not just most fund managers but The Buffett himself, so many institutions would be using it that it would distort market. In other words, if it really worked it wouldn't work.
Still, it's worth a read.
The publishers say 'If you're an investor, this book will impact your financial life forever'. There is a linked website: [...]. Look at the website before you buy the book.
Personally, I'd say that this book might be most suitable for professional investment managers. An individual investing a large amount of money, or money that they cannot afford to lose eg savings for retirement, would be well advised to consult an independent financial adviser after reading this book, and BEFORE committing their funds. I am cautious by nature in money matters!
You'd also want to consider very carefully how the advice in this book translates to our side of the pond - what works in the USA may not work quite so well in the UK.
The book is well designed, but a bit overly familiar and conversational in tone for my taste.