Friday, July 14, 2017

What Do P/E Ratios Really Mean?

Taken from p. 143 of Active Value Investing, the classic book from Vitaliy N. Katsenelson.

P/E (price per earning) refers to the amount of money stock investors are willing to pay for the stock as reflected in its stock price. First, determine how much the company is earning per share. Then check the stock price. Divide the current stock price by the earnings per share number. You have the P/E ratio!

So is a high P/E a good or bad sign? Depends.

A new growth stock will typically show much higher P/E ratios than an established company. Once a company stops growing rapidly, the P/E ratio will actually decline. 

Katsenelson quotes the legendary Benjamin Graham as giving a P/E figure of around 8 as about right for a company with solid fundamentals but low growth.

Katsenelson includes a cool chart on p.143 that shows appropriate levels of P/E in relation to expected levels of growth.

Saturday, July 8, 2017

Book Review: Krupp: A History of the Legendary German Firm

A short book review for you today. 

Krupp is a German Company famous for its high quality steel, armaments, appliances and other products.  It is a prototypical German company that follows the German model of higher wages, export led growth, and close cooperation with the government. 

Krupp: A History Of The Legendary German Firm is an informative and easy- to-read history.  German corporations are distinctly different from American ones: they are typically family-owned and prize quality instead of cost saving. A lot of this is made possible by the extreme emphasis on export led growth, and the book is very informative on this point.

Thursday, June 29, 2017

Social Interaction Books for Marketing and Advertising

Here are some offbeat subject headings with some very fascinating material for you:

Exchange Theory (sociology)

Social Interaction

Social Groups

Helps you understand group dynamics and human relations.

Use in marketing and understanding human nature in general.

Tuesday, June 20, 2017

Creativity in Business

Yes, it can be learned. Here's a list of our books on creativity in business.

Frankly, one of the best ways to learn about creativity is by reading a lot of fiction, history, the great books, and experiencing great music and art. You learn so much about connections, human psychology, and the craft of making the imagined real.

Monday, June 12, 2017

Book Review: Francis Fukuyama Trust


Why are some societies more economically successful than others?  It is an age old question and Francis Fukuyama believes the issue is trust.

Find his book here. 

Trust allows larger scale economic enterprises beyond the immediate family.  But how does this occur? Fukuyama argues that large private organizations like guilds or church based civic Associations are key. If the state replaces these organizations, trust withers. Somewhat confusingly the author argues that individual rights taken to an extreme are also to blame. Perhaps the author is suggesting a return to paternalistic corporatism?

Read a review here.