Wall Street On Sale

Hot stocks may get all the attention in the press, but, Timothy Vick argues in Wall Street on Sale, you're not going to beat the market chasing the latest high flyer. Vick, founder and editor of the newsletter Today's Value Investor, demonstrates how building a winning portfolio means becoming a smart shopper. He starts by offering a thorough definition of value investing, listing its seven principles: buy assets on sale; form a notion of value; avoid losses with a "margin of safety"; adopt a "for-sale" perspective; stick to it; be a contrarian; and ignore the market. Vick looks at the stocks listed in the S&P 500 index from late 1994 to mid-1997. The stocks at the beginning of the test period with a price/earnings ratio below 7 gained an average of 228.3 percent compared to an 85.3 percent return for the entire index. Those low P/E or undervalued stocks were the real winners.

But there's more to being a smart shopper than just buying low P/E stocks. He cites the work of value-investment pros, such as Warren Buffett, James O'Shaughnessy, and Michael Price, mixing in enough tables, graphs, and case studies to prove ably that buying companies at sale prices is a hugely successful stock-picking method. He then shows how to discover hidden values, analyze financial ratios, and assemble a portfolio. And thanks to the development of the Internet, most necessary information is available for free; Vick includes an appendix of 150 Web sites. This is a how-to book for the investor seeking value--the investor that wants to get a dollar's worth of Wall Street for 85 cents. --Thom Hartle