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The Astute Investor
Eric L. Prentis
Professor
Eric Prentis’ stated purpose, as presented on the front flyleaf, is to
position the “The Astute Investor” as the most important stock market
book since Benjamin Graham (patron saint of Warren Buffett) wrote “The
Intelligent Investor” over 50 years ago (1949).
To say that he exhausts the subject would be an understatement. There is
enough material here to cover entire college courses on finance, economics,
and investments. In fact, the book is set up as something one might
encounter in an academic setting. Questions are raised at the beginning of
each chapter along with what the reader is expected to learn. It’s a good
overview of where he’s leading you.
His statement early on that “Investors repeatedly find it more instructive
to be taught the correct questions to be asked rather than to be given only
a momentary correct answer…” (19) lays out the framework for what those
correct questions should be.
Prentis seeks to make his mark by undermining the foundations of The Random
Walk Theory, which rests on The Efficient Market Theory, and dates all the
way back to the French investor, Louis Bachelier (1900). He intends to replace it with his own Discounted Capital Market Theory and
Discounted News Theory – which, together, form his metric by which to
gauge market value.
Perhaps the
high point
of the work is the way Prentis eviscerates The Random Walk. Anyone, today,
who still believes that stock prices wander randomly across the financial
landscape should spend a little extra time with Prentis as he expertly
explains why it simply isn’t true.
He completes his broad examination of investment philosophy with a
well-thought-out 10-step approach to confronting stock market decision
making, then fortifies it with a raft of reference material scattered
throughout the book.
Whether “The Astute Investor” will replace “The Intelligent
Investor” depends upon how well Prentis’ theories age through the years,
and also whether Prentis finds a "new" Warren Buffett to validate
and propagate his precepts. In the mean time, visit his webpage at
www.theastuteinvestor.net to get his latest updates.
Investors looking for a well-rounded approach to long-term investing will
find this is a good place to start.
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