The Entrepreneurial Investor: The Art, Science, and Business of Value Investing

195 Pages·2007·1.27 MB·English

by  Paul Orfalea

The Entrepreneurial
Investor
THE ART, SCIENCE, AND BUSINESS
OF VALUE INVESTING
Paul Orfalea
Lance Helfert
Atticus Lowe
Dean Zatkowsky
John Wiley & Sons, Inc.
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The Entrepreneurial
Investor
THE ART, SCIENCE, AND BUSINESS
OF VALUE INVESTING
Paul Orfalea
Lance Helfert
Atticus Lowe
Dean Zatkowsky
John Wiley & Sons, Inc.
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Copyright © 2008 by West Coast Asset Management. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
The entrepreneurial investor : the art, science, and business of value investing /
Paul Orfalea … [et al.].
p. cm.
Includes index.
ISBN 978-0-470-22714-5 (cloth)
1. Stocks. 2. Value investing. 3. Investment analysis. 4. Corporations--Valuation.
I. Orfalea, Paul.
HG4661.E58 2008
332.67’8--dc22
2007034468
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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Contents
Foreword by Neil Cavuto vii
Introduction: Is Investing an Art or a Science? xi
Part I: Think Like an Owner:
The Art of the Entrepreneurial Investor 1
Chapter 1 Eyes Believe What They See; Ears
Believe Others 3
Chapter 2 Others’ Irrationality Is Your Opportunity 9
Chapter 3 Dirty Harry’s Investment Philosophy 13
Chapter 4 Adversity in Diversity: Portfolio
Concentration 17
Chapter 5 Just Buy the Best (Which Does Not
Include Most Mutual Funds) 21
Chapter 6 Inspirational Figures: Benjamin Graham 27
Part II: Companies Worth Owning 33
Chapter 7 Who Really Manages The Brand?
(Hint: It’s Not the Company) 35
Chapter 8 What Makes You So Special? 39
iii
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iv Contents
Chapter 9 Company Culture Is More Important
than Ever 45
Chapter 10 Bogie & Bergman Explain
Elasticity of Demand 51
Chapter 11 Red Flags and Roaches 57
Chapter 12 Inspirational Figures: David Packard 65
Part III: The Owner’s Manual 71
Chapter 13 Televised Advice: No Worse than
Drilling Your Own Teeth 73
Chapter 14 Lies, Damned Lies, and
Financial Statements 79
Chapter 15 How to Be an Annual
Report Detective 85
Chapter 16 How Inventory Can Skew
the Financials 91
Chapter 17 Great First Impressions: 10 Signs of a
Strong Company 99
Chapter 18 Inspirational Figures: Bernard Baruch 105
Part IV: What’s It Worth—To Me? 111
Chapter 19 The ABCs of Market Ineffi ciency 113
Chapter 20 “Wait Till the Moon Is Full” 119
Chapter 21 Today’s Price for Tomorrow’s Growth:
The X Factor 123
Chapter 22 The Long View, and Why Women
Are Better Investors 129
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Contents v
Chapter 23 Intrinsic Value: Putting it All Together 139
Chapter 24 Inspirational Figures: Howard Hughes 147
Epilogue: The Fortune Cookie
That Ate Wall Street 153
About the Authors 157
Notice and Disclosures 159
Notes 163
Index 167
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Foreword
A HOW-TO BOOK FROM PEOPLE
WHO REALLY KNOW HOW TO
L
et me tell you why this business book is different right from the
start. It’s written by people who know what they’re talking about.
Now I know what you’re thinking—aren’t all business books written
by people who should know what they’re talking about?
Well, yes, they should be. But, sadly, they are not. Whole forests of
trees have been wasted on investment and fi nancial missives written
by experts who were neither experts nor remotely capable of offering
advice. It’s like the old gag about guys driving to Wall Street in Rolls-
Royces so they can get advice from guys who take the subway to work.
Or the guy who goes to a fi nancial planner’s house, only to discover
he lives in a dump. How good a fi nancial planner could he be?
I don’t know for sure about Paul’s home, but something tells
me it’s not a dump. His rags-to-riches, true Horatio Alger story is
now the stuff of business legend. Far from lamenting his academic
challenges, he joked about them. He turned his weaknesses into his
strengths. He joked about his dyslexic brain. He also built an em-
pire called Kinko’s, despite the doubters and the cynics and all those
smart kids who, no doubt, dismissed him.
The difference was, and is, that Paul didn’t dismiss himself and
learned not to casually dismiss others. Paul’s entrepreneurial vision
and gut-level commitment to his coworkers’ welfare make him a
powerful magnet for talent, as we saw fi rst at Kinko’s, and now at
West Coast Asset Management. You see, Paul’s keen understanding
of business comes from his deeper understanding that companies
are made of people. His appreciation for the talents of others made
him and many of his Kinko’s coworkers rich. His gut is right again
with this book on the West Coast Asset Management approach to
investing. He and his coauthors teach with clarity and wit and, yes,
warmth.
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