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Brandes On Value: The Independent Investor [Book Review]

Book Review - Brandes On Value: The Independent Investor by Bruce Grantier, CFA, CFA Institute

Brandes on Value: The Independent Investor presents excellent long-term insights into the field of value investing by well-known value investor Charles H. Brandes, CFA, a colleague of Benjamin Graham and founder of Brandes Investment Partners. In 1971, Brandes, an investment dealer fresh out of school (he studied math and economics), met Graham, the father of value investing, in La Jolla, California, where Graham lived after retiring from teaching at Columbia University. The two met frequently back then; Graham loved teaching, and Brandes reread Graham’s two most famous books (Security Analysis and The Intelligent Investor) and became a fervent disciple of value investing. Brandes on Value, a follow-up to Brandes’s 2004 book, Value Investing Today, provides a broad and timely update to what the author calls a “myriad of tumultuous” topics that have evolved since his earlier book. Value investing, however, remains the same: buy cheap with a margin of safety, avoid the herd, and think long term. Brandes presents all this and much more in a very clear and enjoyable fashion. (In the interest of full disclosure, I have been a member of the Brandes Institute, which develops investment ideas and research, since 2003.)

Brandes on Value has four main parts:

  • “Why Do Value Investing?” discusses 50 years of market history, shows what value investing has produced, and details the main benefits of value investing — higher returns, lower volatility, and lower trading costs.
  • “Where One Finds Value” covers behavioral biases (a major generator of value stocks), Graham’s concepts of intrinsic value and the margin of safety, and the fact that value is everywhere, including small-cap stocks; the European, Australasian, and Far Eastern (EAFE) markets; and emerging markets.
  • “Value Investing in an Ever-Changing Market” discusses value versus glamour, shorting, 130/30 funds, target-date funds, active...