Tonight’s book reviews are of two very different, yet very similar books: Fire Your Stock Analyst!: Analyzing Stocks On Your Own (2nd Edition)
Why different? Well, the first relies on fundamental analysis, and the second on technical analysis. Why similar? They are both very single-minded in the way they present how to win in investing.
There are other differences, though. Fire Your Stock Analyst, by Harry Domash, is a very complete fundamental investing guide for both value and growth investors. Very complete, to the degree that most average investors will not be able to do all that Harry recommends. There is a lot to do, and not all of it is of highest importance in my opinion. Many professional investment shops ignore steps that he prescribes. I don’t do half of what he prescribes, and I do better than most. Also, much of what he prescribes is not applicable to financial stocks, but he does not seem to realize that.
Far from Random has a different flaw. It spends 75% of the book talking about what does not work, and only 25% on what he thinks works. In the last quarter of the book, the author asserts that trend channel analysis works through giving stylized examples. There are no academic studies to prove the point, or, audited track records, as Michael Covel is fond of. (This makes me want to recommend Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets
Who could benefit from these books:
With Fire your Stock Analyst, someone who wants an introduction to fundamental analysis could benefit. Far from Random, I’m not sure anyone could benefit. There are much better books on technical analysis.
Full disclosure: Publishers send me books for free. I review some of them, the ones that I think are most interesting. If you enter Amazon through my site and buy anything, I get a small commission. Don’t buy anything you don’t want. I do this as a service to readers, and am not looking for remuneration as much as tips for what I have written more generally.
Just looking at the table of contents for Fire your Stock Analyst it looks like this book is a more accessible version of the CFA Equity valuation readings.
You don’t mention it in your review but it seems many books on fundamental investing fall into two camps, DCF models and ratio models. Did Fire your Stock Analyst fall into either camp, or was it more of a fusion of both?
Fire your Stock Analyst analyst was not DCF — it was basically two scoring systems, one for growth stocks, and one for value stocks. If a candidate racks up enough points after passing a dozen or so tests, it is a buy.
Note: the book does not explicitly give “a” sell discipline. It does talk about reasons to sell, but does not crystallize it.
There are also a few things that Domash does not do so well — on pages 150-152, he only has a tenuous hold on how bond ratings work.
The problem for the reader is that when he is done with the book, he will find that it is a lot of work. Maybe that is a good takeaway, though. Good investing is a lot of work.
David,
A few years back you mentioned to me in an e-mail that Fabozzi was a good source for understanding bonds (thank you for that advice by the way, he is a very accessible author for what can be very complex material.) In the review of Domash’s book you mention that he does not do a good job with financials. I was wondering, is there an author who is as accessible and clear as Fabozzi, when it comes to financials, who you would recommend.
Regards,
TDL