Value Trap: Theory of Universal Valuation

by Brian M. Nelson

WOODSTOCK, Ill., March 24, 2021 /PRNewswire/ -- The second edition of the business book Value Theory of Universal Valuation has been awarded the bronze medal in the category of Personal Finance/Retirement Planning/Investing at the 2021 Axiom Business Book Awards, presented by Jenkins Group. Less than 20% of this year's entries won an award, and medals went to a mix of the established Big 5 publishers, prestigious university presses, and independent publishers. Previous Axiom Business Book Award medalists include Nobel laureate Robert Shiller, former U.S. Secretary of State Condoleezza Rice, and world-renowned historian and Pulitzer Prize winner Doris Kearns Goodwin. "It's an honor to be in the company of such esteemed publishers and exemplary authors," said Valuentum's President Brian Nelson, CFA. "Thank you to everyone at Jenkins Group for having such a fine awards program, and my deepest congratulations to all of this year's winners." Nelson's book Value Trap continues to advance finance and investing, encouraging forward-looking analysis in quantitative data applications while warning about price-agnostic trading and its impact on the health of the stock market and the savings of everyday investors. BookLife by Publishers Weekly noted of Value Trap that "readers steeped in the stock market will appreciate this persuasive economic treatise, which sounds the alarm on spurious quantitative analysis." BlueInk Review said the book "stands on its considerable merits as a well written and cogent articulation of a distinct perspective on equity analysis." "Data 'makes us feel like we are in control, but the conclusions can be misleading if the data isn’t used in the right way,' Nelson warns in his persuasive debut, which attempts to shift the market’s belief in quantitative models of stock analysis back toward a more traditional enterprise valuation approach. Nelson, the president of equity and dividend growth research at Valuentum Securities, demonstrates how quantitative evaluative techniques that base pricing and investment strategies on trends in large sets of past data can lead investors to mistake correlation for causation. This can lead to conclusions that, as he puts it, are 'no more predictive than believing the divorce rate in Maine will fall if we just slow our margarine consumption' simply because those two statistics have risen and fallen together. Nelson makes the case that 'spurious' or statistically insignificant correlations mined from ambiguous past data aren’t just a danger for individual investors or investment managers, but in an era of unprecedented volatility, these strategies will continue to increase the market’s erratic tendencies (especially in the uncertain age of Covid-19). Nelson proposes instead that greater returns—and greater market stability—would come from resuming strategies based on enterprise valuation, with an emphasis on forward-looking causal data and companies’ available cash assets. This second edition is updated with a hefty prologue that invites readers to evaluate Nelson’s track record. He surveys the relative stability of his Valuentum stocks—stocks that meet the criteria of his 15-point checklist—over the course of 2020, demonstrating them to have been at least “pandemic-resistant” when not “pandemic-proof.” Readers eager for a simple investing system may find Nelson’s thorough case-making frustrating, but this work was conceived as a cry for economic stability, not an entry-level guide, and more experienced investors will find it thought-provoking and worth their time. Readers steeped in the stock market will appreciate this persuasive economic treatise, which sounds the alarm on spurious quantitative analysis. Great for fans of Aswath Damodaran’s 'The Little Book of How to Value a Company, Pick a Stock and Profit'; Richard Barker’s 'Determining Valuation Models and Financial Statements.'" -- BookLife Review by Publishers Weekly

Genres: Finance

426 pages, Paperback

Published July 20, 2020

Reviews

[Arturo]

Este libro puede tener una valoración distinta en función de lo que uno lleve ya en la mochila. Para mi no aportó prácticamente nada nuevo que no conociera ya, y un poco caí preso de la ilusión de ir esperando algo más, y algo más sucesivamente, que nunca apareció. Sin embargo, el libro contiene ideas que son interesantes (valoración, el papel de los dividendos y cómo de arriesgado es mirarlos hacia atrás, donde está el grueso de los ingresos que tienen más importancia en la valoración, por qué lo importante no es la verdad sino la percepción de la verdad y qué puede hacer cambiar esa percepción ...) también en la valoración para quien no se haya visto expuesto a ellas, o precise consolidarlas. Además tiene algunos matices ciertamente originales a la hora de plantear cómo acercarse a esas ideas. Con todo, el libro es excesivamente largo para todo lo que podría haber dicho en un máximo de 4 ó 5 páginas, y tiene un cierto tufillo de publirreportaje sobre la empresa del autor, Valuentum. La redacción tampoco es de las mejores, fluye en las partes más de "storytelling" que suelen aparecer al principio de los capítulos, pero se enfanga bastante al intentar explicar conceptos, aunque la repetición sólo para esto ayuda un poco.

En resumen, no le irá mal a un aprendiz, pero probablemente haya otras obras que sean mucho más interesantes para acceder a este conocimiento.

[Paul]

Very little new in this book. The author spends much time calling why intrinsic value is important. He does introduce 2 concepts that were new to me that I thought might be useful “Dividend Cushion” and RONIC return on NEW invested capital. He doesn’t give any insight on how to calculate intrinsic value. The book ends with an advertisement for his newsletter Valium. One thing that is interesting is that in his “advertisement “, he does not state any performance rrsults

[Best Indie Book Award]

🏆 2019 BIBA™ Business Winner!