Investment-manager

Stockpicker will initiate a new method of company valuation. It provides a fresh look at the often forgotten, but extremely important measure of free cash flow.

The Roadmap model addresses a complex problem by applying Theory of Constraints measures and pattern recognition. This enable focus by both an investor and the incumbent management on what the company should really be about.

The release of this book is both though provoking and timely.

The authors have provide detail explanations of both TOC and profit patterns so that even the novice can easily apply this approach. The book also includes spreadsheets to use to perform easy analysis of your stocks.

If you are looking for a method to use for long term investing this may well be the book for you.

If you want something a lot more numerical and yet friendly, I'd suggest "The Complete Guide to Option Pricing Formulas by Espen Gaarder Haug" to go alongside this book - thats a classic as well. If you want to see the Black-Scholes model in operation, check out http://erudition.com/derivatives/. Good luck.

According to Useem, the struggle for corporate control is no longer "just another squabble among the rich and powerful," since most Americans now "derive a substantial fraction of their current or future livelihood from the performance of companies whose stock they directly or indirectly own through pension funds and mutual funds." Critical to the book's many informative insights are a series of interviews the author conducted between 1991 and 1995 with a wide array of corporate and investor executives. The result, is a rare behind the scenes look at how "investor capitalism" is reshaping the corporation.

The dismissals of top executives at GM, Digital, IBM, Kodak, Kmart, and others were only the "most visible edge of a more widespread development." "Shareholders can replace directors, directors can replace managers, and managers in turn can replace shareholders." Each party is now on a more equal footing. Institutional investors put out their Focus List but corporations now use their investor relations staff to hold "shareholder mix" campaigns. Such campaigns usually seek to increase the holdings of employees and individual investors with modest holdings.

Yet, for all the changes increasing the voice of institutional investors, only 6% of 375 major firms surveyed in 1992 received a single director nomination from an institutional investor. Another study cited by Useem shows that "directors' careers bear little or no relationship to their performance on behalf of shareholders."

The book contains a wealth of information and behind the scenes examples. Useem's description of an executive's frustration with pension fund managers in comparison with mutual fund managers is particularly interesting. "Mutual fund managers pay more attention to strategic directions, product performance, and prospective risks. Strong pension managers, by contrast, seem more preoccupied with the formalities of governance." For the CEO the "challenging--and useful--questions lay in product strategy rather than broad policy." This guided how he allocated his time. However, with the average mutual fund turning over their stock every 6 months, instead of once every 7.5 years for the average public pension fund, I have to wonder if the vision of this and similar CEOs might be just a little short sighted, especially given the importance that "corporate governance" issues may play as money moves more widely abroad.

Useem points to the recent dramatic increases in the global market. Capitalization of the Hong Kong market, for example, went from $74 billion in 1988 to $385 billion in 1993. Prior to 1990, 20% or less of new equity investments went to foreign stocks; by the beginning of 1994 that was up to 40%. These investments have displaced the investments of the World Bank, national governments and private creditors as the largest source of external financing. International bodies are harmonizing accounting and securities standards. The Department of Labor requires pension fund managers to cast informed proxy votes with the same diligence as in the U.S. CalPERS has announced a program to expand international holdings from 13% to 20% of its assets. Convergence is seen as a major theme.

Convergence is also carried over when Useem brings the split between corporate and money managers down to the personal level. Company executives see each other at the Business Roundtable, Committee for Economic Development and Bohemian Grove. "They frequent the same clubs, sometimes the same schools, occasionally the same islands." Those presiding over public pension funds and investment companies, however, remain remote from the "higher reaches of traditional business community." Their networks instead lead to such professional circuits as the New York Society of Securities Analysts and the Association for Investment Management and Research. For Useem, as a professor at the most highly rated business school in the country, the M.B.A., as the "credential of choice for movement into top management at both large firms and large investors," will result in "two years of shared training...each of the two sides will have a lingering appreciation for the concerns and challenges of the other."

The strength of Investor Capitalism lies in its vivid descriptions of personal communications derived from dozens of interviews and Useem's unique ability to draw on a large number of surveys from other reputable sources. While personal relations will be critical to building the next stage of development, it is also important to examine the process constraints within the current system which shape our everyday behavior.

For example, open-ended mutual funds have liquidity problems which discourage "ownership" and long-term holding. Section 16(b) of the Securities Exchange Act of 1934 requires shareholders with 10% or more of a stock to return short-swing profits, even if the trading was done without inside information. Most pension funds exist in a culture of "blame avoidance" built around the legal concept of "prudence." Although portfolio theorists generally agree that 99% of the risk management value of diversification can be achieved with a portfolio of only 100 stocks, pension plans continue to over diversify. Congress and/or the Securities and Exchange Commission could provide mechanisms for hybrid "relational" type mutual funds by allowing funds to require some notification prior to withdrawal and by adjusting 16(b) requirements. Congress and/or the Department of Labor could clarify that prudence, under ERISA, is to be evaluated on a portfolio-wide, rather than individual investment basis. The mutual cooperation between long-term owners and corporate executives which Useem envisions appears unlikely to be fully realized, regardless of the benefits of shared educational experiences, unless such structural reforms are made.

Useem notes that "when U.S. company executives describe the relations they have established with investors, few cite other company experiences and none allude to non-U.S. models." He concludes that "companies have, of necessity, invented their own solutions to the problems of managing a far more concentrated yet still remarkably diverse ownership base." The increasing use of books such as Michael Useem's Investor Capitalism, Monks and Minow's Watching the Watchers, Mark Roe's Strong Managers, Weak Owners, and Margaret Blair's Ownership and Control in MBA programs should go a long way, both in reducing the need of company executives to continually reinvent emerging solutions to problems in the area of corporate governance and in furthering their dialogue with shareholders.

James McRitchie is the editor of Corporate Governance, http://www.wp.com.corpgov

As a beginning landlord, I cannot recommend this book highly enough!!

I own 3 properties so far and this book has made my success possible!

Nevertheless, the book was an easy read and many of his points were right on target. I would also highly recommend interested readers to check out "The Value Imperative" by Marakon Associates and "Valuation" by McKinsey & Co for more information on value based management.

Buffett's techniques for dealing with people are well-known (he talks about them constantly) and this book has almost nothing really new to reveal, but Berkshire junkies will enjoy the anecdotes and facts that bring Buffett's concepts to life in a more concrete way. Even though many of the stories are recycled, hearing a few of the managers speak in their own words and tell their own versions is revealing. That Buffett himself made a kind remark about this book is unremarkable. What else could he possibly say about a book that features some of his key people? Bottom line: this is definitely a book for those already familiar with, and enthusiastic about, Buffett.

Miles' publisher, Wylie, has created a virtual industry out of quickie trade books about Buffett. Wylie's new twist in this book is the Berkshire managers, who provide whatever shine it emits. But somewhere along the way, a mighty big assist must have been delivered on the editorial end to tone the writing style down into something publishable. How so? Miles himself comes across as one of the most self-aggrandizing, uber-promotional, un-Buffett-like people imaginable. That someone could write about Warren Buffett, with seemingly so little concept of what the man is about, is amazing. It wouldn't be the first time Buffett's name has been exploited by someone who barely knows him, but Miles takes exploitation to a whole new extreme. The Robert Miles web page, which reminds one of a three-card monte dealer or perhaps, one of the more gelatinous used car salesman types, speaks for itself. The headline, "You May Never Meet Warren Buffett, But Hear Robert P. Miles Speak and You'll Feel Like You Have" says it all. If you want to read a book about the value of humility by an author who has the nerve to compare himself to Warren Buffett, well, this is that book.

This book perfectly filled this gap!

According to me, the chapter "Buffett CEO Compensation" is particularly interesting if one considers the current management desasters caused by the "motivation" tool called stock-options. Miles has prepared a good overview on Buffett's convincing anti-stock-option arguments and describes how Berkshire Hathaway compensates its CEOs with cash only. Very clear and very simple, as most of Buffett's fundamental rules.

Though having also been interested in the usually finance driven literature on Warren Buffett, I always missed to learn more about the soft facts in the incredible success story of Berkshire Hathaway.

This book perfectly filled this gap!

According to me, the chapter "Buffett CEO Compensation" is particularly interesting if one considers the current management desasters caused by the "motivation" tool called stock-options. Miles has prepared a good overview on Buffett's convincing anti-stock-option arguments and describes how Berkshire Hathaway compensates its CEOs with cash only. Very clear and very simple, as most of Buffett's fundamental rules.