Acknowledgments ix

Introduction 1

Chapter 1 What Is Intrinsic Value? 11

Chapter 2 Price Is What You Pay. . . 23

Chapter 3 . . . Value Is What You Get 53

Chapter 4 Follow the Money 71

Chapter 5 Everything Is Number and Ratio 109

Chapter 6 Measuring Value by Taking Snapshots 143

Chapter 7 A Bird in the Hand 169

Chapter 8 The Joy of Dividends 195

Chapter 9 Don’t Get Mad, Get Even 219

Chapter 10 PEG and Friends 229

Chapter 11 What Rate of Return Can I Expect? 241

Chapter 12 Please, Sir, I Want Some More 261

Chapter 13 Forecasting and the Three Most Important Words in Investing 287

Chapter 14 Where Do We Go from Here? 319

Appendix A Relationship between Return on Equity and Growth of Earnings 323

Appendix B Calculations for Discount Methods 325

Notes 333

Glossary 345

About the Author 353

Disclaimer 355

Index 357

"A book of exceptional practical value." —Martin Fridson

The CONSCIOUS INVESTOR

The United States is experiencing "the worst financial crisis since the 1930s," according to George Soros. But you don't need one of the world's greatest investors to tell you what you already know. What would be useful is knowing how it is that he and other astute investors—Warren Buffett, Benjamin Graham, and Peter Lynch—made a great portion of their profits during times of extreme economic uncertainty. The short answer is: successful investors know which stocks to buy and when, as well as when to hold and when to sell. How do they know these things? The Conscious Investor: Profiting from the Timeless Value Approach provides the answer—stock valuation methods.

As an investor, if you're unable to measure a stock's true value, then it's all but impossible to know whether your purchase is likely to prove profitable. Your "unconscious investing" makes your hope for a financially secure future just that—a wish left to the whims of a fickle financial market. In The Conscious Investor, Dr. John Price describes the quantitative methods investors like Buffett use to determine value and, thus, whether or not an investment will make money. Dr. Price details:

• Intrinsic value and ways of measuring it
• Price-setting mechanisms and influences in the stock market, as well as the difference between pure price theories and fundamental data theories
• Real value as a combination of intrinsic value and price
• Accounting and the role of financial statements (balance sheet, income statement, cash flow statement, and equity statement) in providing data for valuation methods
• Off–balance sheet obligations
• Key financial ratios in analyzing and filtering companies
• Over 20 valuation methods, including each of their strengths and weaknesses

Despite turbulence at the surface of "the worst financial crisis since the 1930s," investors like Buffett, Soros, and Lynch understand that underneath the uncertainty, they're still dealing with real businesses with real products and services, and that it's possible to profitably invest in them using timeless valuation methods. With The Conscious Investor, you'll know how the great investors profit from uncertainty. You'll begin the process of transforming yourself from a speculative hopeful into a wealth winner.