At times, investing can seem like trying to navigate blindfolded, especially to the novice trader. We might know where we start from and where we want to end up, but we aren’t sure how to get there or where we are at any given point in time.
In “How to Value Shares and Outperform the Market”, Glenn Martin offers a raft of useful advice on how to value indices and shares, helping us take off our blindfolds and steer our portfolios to healthy returns. With a specific focus on value investing, but with an unconventional approach, the book provides detailed information on analytical methods, along with practical advice for investment, making it a useful aid to investors of all levels of expertise.
Author Glenn Martin has a highly developed investment mind, having gained his ideas and strategies over a three decade plus career with a number of financial institutions. Starting his working life with Williams and Glyn’s he worked across a number of desks in the Square Mile, latterly in the role of Chief Information Officer for several investment banks. But it was during his time as private investor when the foundations for this book were laid, after he developed a system for calculating the intrinsic value of the FTSE 100 and of individual UK shares – a system which apparantly gave correct valuations on repeated occasions.
Techniques…
Divided into five parts, the book begins with a discussion of valuation methods, not only describing Martin’s preferred techniques but also some detailed discussion of the flaws in other, more traditional, approaches. This (often controversial) section, leads into a detailed discussion of Martin’s “new” valuation system, which allows readers to implement analysis on data of their choosing, along with detailed instructions on how to programme the analysis structure in Microsoft Excel.
Martin’s unique analysis methods focus on calculating the intrinsic value of an index or share by inputting various economic data into a spreadsheet. While the level of detail here may sound imposing to the amateur, the book does talk them through the process from start to finish, which separates it from others which claim to provide help to beginners but end up leaving them short of a complete strategy.
The end result is a valuation model, upon which trading decisions can be made. Not many books aimed at the private investor actually explain how to create and apply valuation models in such a simple manner, so for that reason alone the book is well worth a read.
Strategy…
A particularly useful part of the book, Part 4, explains how to put the valuation system into practice by developing strategies. Investors who are a bit more adventurous will be particularly interested in Martin’s High Risk/Stellar Return Strategy, which explains how to play covered warrants, along with financial spread betting.
While the book does contain mathematics, complex knowledge is not required and, as mentioned above, there is a detailed guide to inputting the information in to a computer which even technophobes should be able to follow. The discussion of other investment strategies is couched in a way that less informed investors should be able to follow, while still covering the subjects in sufficient depth and offering points of interest to experienced professionals. While the book’s focus is on UK blue chip investments, the principles discussed can be adapted to suit other situations and markets.
Investment essential…
This book is a must have for private investors starting out in the world of trading and investment. Importantly, it provides the tools for individuals to manage their own portfolios, crucial in a world where decent pension and investment returns are hard to come by. What’s more, both experienced and professional investors alike should be able to generate new ideas and ways of going about their research after reading it.
Overall, How to Value Shares and Outperform the Market provides a great deal of useful information to anyone wanting to develop an investment strategy focused on finding value and generating long-term gains.
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