Energy and Power Risk Management: New Developments in Modeling, Pricing and Hedging

Book Description

Praise for Energy and Power Risk Management

"Energy and Power Risk Management identifies and addresses the key issues in the development of the turbulent energy industry and the challenges it poses to market players. An insightful and far-reaching book written by two renowned professionals."
-Helyette Géman, Professor of Finance
University Paris Dauphine and ESSEC

"The most up-to-date and comprehensive book on managing energy price risk in the natural gas and power markets. An absolute imperative for energy traders and energy risk management professionals."
-Vincent Kaminski, Managing Director
Citadel Investment Group LLC

"Eydeland and Wolyniec's work does an excellent job of outlining the methods needed to measure and manage risk in the volatile energy market."
-Gerald G. Fleming, Vice President, Head of East Power Trading, TXU Energy Trading

"This book combines academic rigor with real-world practicality. It is a must-read for anyone in energy risk management or asset valuation."
-Ron Erd, Senior Vice President
American Electric Power

Customer Reviews:

A good book for the designer of energy risk managment tools.......2005-09-29

If you develop computer code in this field it could be a help, but if you are more interested in knowing more about the ways to avoid risk in the energy business I would recommend another book. There are also not enough practical examples to give a good understanding of the principles.

Dynamic hedging is not explained to the extent wanted. The examples are also not very clear.

Not for the average industry professional.......2004-08-20

The authors have written a very detailed, well structured text on the different models and developments in the power and fuel markets. It's a very complex, mathematical analysis of the different techniques being used, and the text may lose a number of readers in the overly rigorous formulations. For those involved in risk management, market modeling, or asset management, the book would be a good secondary or tertiary read after you've established a sound understanding of stochastic models and current hedging and pricing techniques in the marketplace. For the layman in the industry, the book will be far too heavy and not worth the read.

Good overview.......2004-06-07

The management of risk in the context of energy or weather is quite different than in other contexts, due to the peculiarities of the data that occurs in energy prices. The high volatility of energy prices can range, as the authors of this book point out, between 50-100% for gas, to 100-500% for electricity. No doubt this kind of volatility, and other properties such as correlations and mean reversion, entails that some different mathematical strategies for modeling energy derivatives be devised. The authors give a good tour of some of these strategies, and anyone interested in energy derivatives will gain a lot of insight into their modeling when reading this book. Due to space constraints, only chapters 5 and 7, which this reviewer considered the most important of the book, will be reviewed here.

In chapter 5 the author presents techniques for energy modeling that go beyond the used of the convenience yield by using forward pricing techniques. The goal is to describe the dynamics of future contract prices that takes into account the correlations with other futures, and not on the price evolution of a single contract. Thus it is the `forward curve' that is relevant for obtaining a useable model for derivative cash flow. The HJM model is presented as one of these, with changes in the forward curve over a particular time interval represented as a linear combination of random perturbations. For energy markets, each perturbation is specified by a deterministic shape function multiplied by a Gaussian factor. The unobservability of the factors determining the forward curve evolution makes the use of historical data mandatory if the parameters are to be estimated. But lack of sufficient historical data and its nonstationarity complicate this estimation. The authors discuss the Schwartz-Smith multi-factor model as an example of a forward curve dynamics model and give some solutions. They then move on to a model that specifies the dynamics for only the contracts that are actually traded, which in the literature are called `market models.' The model they actually discuss is a multivariate geometric Brownian motion representation of the forward curve dynamics, where the volatility and drift functions are linear functions of the forward prices. The authors then derive the `discrete string models', where it is assumed that the number of factors is equal to the number of contracts, and the random factors are governed by ordinary Brownian motion. String models are represented as having the advantage of being able to directly observe the factors in the historical data. The authors apply string models to multi-commodity cases, and discuss an example for monthly forward prices. They show how to match the current forward curve, the option prices, and the correlation structure for this model.

The discussion in chapter 7 revolves around finding better models for the dynamics of power prices that capture the special properties of energy prices, such as mean reversion and seasonality, and the need for stable models. They therefore introduce `hybrid models', which they claim give a more natural representation of the dynamics of power prices, make use of nonprice forward-looking information, and can take the historical data on power prices and then extend it to information on fuel prices, outages, etc. The construction of these models is based on the use of nonlinear transformations on a collection of random variables. The random variables are essentially the system demand, natural gas and oil price, outages, emission prices, and weather at a particular time. The power price then can be written as a function of the dynamics of these factors, the latter written by the authors in terms of the corresponding tradables. Recognizing that hedging cannot be done on some of these factors, they adjust the power price formula so that the power tradables, i.e. the forwards and option prices, are exactly matched. This matching transformation is chosen so that if the forward contracts and options are priced using the adjusted formula, one recovers the exact current prices. The model, as the authors summarize it, is an attempt to explain the behavior of the tradables in terms of the evolution of the underlying factors and static adjustments to the terminal probability distribution. Historical information on the tradables and spot products is not used to calibrate the model, but it is used to validate the model. The authors distinguish between `reduced-form' hybrid models, where the transformation is calibrated from the historical prices, and `fundamental' hybrid models, where the transformation is calibrated from the market structure and is only tested on the historical prices. The authors discuss an example of a reduced-form hybrid model that is heavily parametrized, but has the advantage of using price data more efficiently. The rest of the chapter concentrates on fundamental hybrid models, with the author first discussing how power prices are formed in competitive markets. They consider a typical pool market, with the price determined via auction mechanisms. The authors then try to identify and characterize the underlying random variables that actually affect power prices. The time series for the price of power is written in terms of the demand using a `bid stack' function. The bid stack function is approximated by a `generation stack' that is found for a given time by sorting generation units by their generation costs. This approximation is checked by comparing the marginal generation costs generated by the generation stack with the distribution of power prices determined by the time series via the bid stack. There should be agreement in both approaches between the higher order moments. This comparison forms the basis of the authors' hybrid approach to modeling power prices. A transformation is found which relates the marginal generation costs to the distribution of power prices with the requirement that the prices of market instruments used for calibration are matched, and the higher moments are (approximately) preserved. The transformation is not unique, and in fact a family of transformations induced by the multiplication and stack scaling operators can be found.

Excellent subject treatment.......2004-05-06

Until now there were a handful of papers, precious few books, and mostly inside proprietary models and experience that dealt with the complex subject of power trading and all its flavors. This book provides a nice summary of many of the present issues. The treatment of the subject is somewhat mathematically rigorous, so the book might not be for traders as much as it is for quants or risk managers.

To me, the greatest strength of the book lies in its fairly detailed analysis of what DOESN'T work, i.e. why common models and methods from the financial and other commodity realms can not be successfully grafted onto the energy market without risking significant valuation and cash flow prediction errors. The hybrid model they formulate towards the end of the book is very similar to Skantze and Ilic (2001). The departure from most previous models is that they attempt to use the markets to formulate and calibrate the structure instead of relying too much on past historical price/load data, which without some empirical understanding of the underlying processes, is fraught with danger due to rapidly evolving nature of the power market (or at least once rapidly evolving--it seems to be a little static at the moment).

Some familiarity with the market and stochastic/statistical mathematics is assumed. References to specific topics and more in depth analysis of particular subjects are good. The authors have a grip on real-world trading, risk, and cashflow issues, which makes this a useful reference for just about anyone associated with those aspects of the power market. I recommend it.

excellent book.......2003-03-18

Extremely well written and right to the point, with the appropriate level of technical detail, Eydeland and Wolyniec's Energy and Power Risk Management is arguably the best book on the subject. A must have for every professional in the industry.

The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy

Average customer rating:

A lattice of mental models for investing
Read Buffett, don't waste time with Hagstrom
Waste of time
Light, enjoyable and enlightening
A true treasure among modern investment books...

The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy
Robert G. Hagstrom
Manufacturer: Wiley
ProductGroup: Book
Binding: Paperback

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ASIN: 0471392642

Amazon.com

It's no secret that most mutual funds fail to beat the performance of the S&P 500. And if the pros can't beat the averages, it's not unreasonable to assume that most individual investors can't, either. Why? According to Robert Hagstrom, author of The Warren Buffett Portfolio, a big reason is the industry's emphasis on diversification. In the interest of minimizing risk, many investors have "become intellectually numb to its inevitable consequence: mediocre results." As a result, they wind up owning too many stocks and churn their portfolios unnecessarily (for example, the average mutual fund holds 100 stocks and turns over 80 percent of its portfolio annually). In The Warren Buffett Portfolio, Hagstrom shows how Buffett and others use the idea of focus investing to organize winning portfolios.

Unlike Hagstrom's first book, The Warren Buffett Way, which describes how the world's greatest investor selects individual companies, this book looks at the mathematics, the psychology, and the mental models necessary to build a successful portfolio. The basic ideas: Pick no more than 10 to 15 companies with good track records and high probabilities of future success; plan to hang onto them for at least five years; and ignore predictions and the sometimes terrifying swings in market behavior. It's hard to argue with Hagstrom's approach, especially when he practices what he preaches. His fund, the Legg Mason Focus Trust, has 15 stocks, an annual turnover rate of 9 percent, and percentage annual returns in the mid-30s. For thoughtful investors and devotees of Warren Buffett, who are looking for more than the next hot stock tip, The Warren Buffett Portfolio is well-written guide. Recommended. --Harry C. Edwards

Book Description

The Warren Buffett Way provided the first look into the strategies that the master uses to pick stocks. A New York Times bestseller, it is a valuable and practical primer on the principles behind the remarkable investment run of the famed oracle of Omaha. In this much-awaited companion to that book, author Robert Hagstrom takes the next logical step, revealing how to profitably manage stocks once you select them. THE WARREN BUFFETT PORTFOLIO will help you through the process of building a superior portfolio and managing the stocks going forward.

Building a concentrated portfolio is critical for investment success. THE WARREN BUFFETT PORTFOLIO introduces the next wave of investment strategy, called focus investing. A comprehensive investment strategy used with spectacular results by Buffett, focus investing directs investors to select a concentrated group of businesses by examining their management and financial positions as compared to their stock prices. A strategy that has historically outperformed the market, focus investing is based on the principle that a shareholder's return from owning a stock is ultimately determined by the economics of the underlying business.

Hagstrom explains in easy-to-understand terms exactly what focus investing is, how it works, and how it can be applied by any investor at any level of experience. He demonstrates how Buffett arranges his stocks in a focus portfolio and reveals why this is as responsible for his incredible returns as the individual stocks he picks. Ultimately, Hagstrom shows how to use this technique to build and manage a portfolio to achieve the best possible results.

Customer Reviews:

A lattice of mental models for investing.......2007-05-29

The book is short, but gives you a lot to think about. I was interested in it mainly because Munger and Buffett gave it a nod. Many of the concepts were enlightening, he presents some good empirical evidence to support his arguments, and he hits all of the main points of the focus investment strategy which Buffett uses. He could have gone into a little more detail in the mathematics section, where I found myself dissatisfied with his unnecessarily vague and subjective treatment of the core concepts of probability. I say unnecessarily because I realize the purpose of the book is to give investors a mental framework for successful investment, but he could have easily included some practical information for investors on how to actually implement these strategies. For instance, a short example of his own, describing in detail the use of expected value (a simple statistical measure he alludes to but never mentions), would have helped to remedy the situation. He actually shows a simplified form of the Kelly Criterion (where payout is fixed), but failed to also include the more useful formula, which would have better shown the critical link between payout odds and probability (which together make up expected value), and optimal betting size. Sometimes little things like this make all the difference in our understanding, but in certain instances in the book he presents them as isolated concepts, and the informed reader is left believing the author doesn't really have a strong grasp of what he is writing, or at least didn't do a very good job of connecting his ideas together. He leaves it up to you to do the work of integrating the ideas into one. Still, he gives you the basic models you need, and does do a really good job incorporating his interviews with Buffett, Munger, Ruane, etc. into the book. If you will take the time to investigate and fill in the details, his theories will solidify nicely into one very powerful model, and this book will have served its intended purpose well.

Read Buffett, don't waste time with Hagstrom.......2006-08-16

I bought it, by the title mentioning W.B.
Wasted money: Whenever it comes to the details, he refers to his other book "The W.B way" (which I do not have, amazon ratings are poor though). Nothing wrong with the contents, but nothing new either. Just read the Berkshire Hathaway Annual Letter to the Shareholders (free on the web), with more and actually useful info. This book has ZERO value after reading the Letters, and this book ALONE does not quite help you picking stocks (although makes a good point in favor of WB's way)

Waste of time.......2005-08-09

Go right to the heart of the matter with Graham and Dodd's "Security Analysis" if you want to know how Buffett started. Hagstrom's book is a poorly executed fifth grader's book report on the primary investing philosophy of Buffett. Don't waste your money here. You'll regret it. This doesn't even scratch the surface of relevant information.

Light, enjoyable and enlightening.......2005-01-15

This book presents Buffet's and Hagstrom's portfolio allocation methods. I say Hagstrom's because I think that much of Buffet's allocation methodology remains between Buffet's ears -- and not that of Hagstrom the author. Also, I believe Buffet is more opportunistic; he acts decisively when opportunities present themselves.

The author adds discussion of technology stocks, an anathema of Buffet's, and the obligatory discussion of complex adaptive networks which might not be Buffet thinking but more along the lines of Charles Munger, his cohort.

Nevertheless, there are many interesting points in this book. I listened to the audio tapes and they excellent. I then took the book out from the library and liked the tapes more.

The author covers several important topics, in a summarized way, but also in a very interesting way. One topic done well was thinking in terms of probabilities. Another was diversification: don't over-diversify.

The author also quoted from several books outside of the financial area and have become intrigued with them. They were: Fire in the Mind (Johnson), Full House (Gould), Against the Gods (Bernstein).

I think Hagstrom is a very good author but his works seem to lack the detail that I like to see. He's one that can pull the strands of many topics together but perhaps skates over their details. I would have liked more detail on subjective probabilities as applied to the stock market for example. More on how Bayes, etc.

John Dunbar
Sugar Land, TX

A true treasure among modern investment books..........2003-07-03

In "The Warren Buffett Portfolio", author Robert Hagstrom devotes an entire book to debunking the greatest misconception prevalent in the investment world today: the myth of "diversification". Hagstrom sets out to prove that Mark Twain was a market wizard when he said "put all of your eggs in one basket, and guard the hell out of that basket!"

The heart of this book rests on the premise that a proper portfolio must be "diverse" (i.e. must include 40 to 100 different companies) in order to remain "safe" and avoid a loss of capital. However, while such a notion may decrease short-term volatility, it does not necessarily increase returns. Hagstrom examines investment guru Warren Buffett's ideas on the subject, such as "knowledge decreases risk, not the number of stocks in your portfolio". Such an approach makes sense. Which is better, to own a few companies that you know everything about, or a lot of companies that you know little or nothing about? The less you know about a company, the more likely it is that an unforeseen event will sneak up on you and hammer your portfolio.

The book also addresses the fallacy of "re-balancing a portfolio". Again, Warren asks, why are you selling off your best company to buy a bunch of under-performing companies? Such a line of thinking is akin to saying "Michael Jordan takes too many shots and makes too much money relative to the other players on his team, so he should be traded to another team for three players so as to decrease the risk of an injury hurting the team... or we should give more shot opportunities to players of lesser talent so that the team doesn't become dependent on Michael Jordan to win." Nobody ever won an NBA Championship with run-of-the-mill players, but the Bulls won six NBA titles by relying on Michael Jordan.

It's this stalwart advance in the face of conventional wisdom that separates this book from most in the stock investment genre. Give it a try. You may find it's the most profitable book you've ever purchased...

Customer Reviews:

Powerful portfolios for any medium.......1999-03-31

This is probably the only book of its kind that pinpoints an often over-looked job search tool: portfolios. I took Martin's concepts further by applying them to Web resumes. The Web is the perfect medium to incorporate items once considered taboo in traditional paper résumés. This is an excellent primer on developing portfolios that can apply to any medium, whether it is in digital form or on paper.

The Power of Portfolios: What Children Can Teach Us About Learning and Assessment

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The Power of Portfolios: What Children Can Teach Us About Learning and Assessment
Elizabeth A. Hebert
Manufacturer: Jossey-Bass
ProductGroup: Book
Binding: Paperback

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ASIN: 0787958719

Book Description

How should a student's learning be measured and assessed? Standardized tests identify the most knowledgeable child, whereas student portfolios can identify the knowledge level of each individual child. In The Power of Portfolios, Elizabeth A. Hebert offers a practical and imaginative approach for using portfolios with elementary level students and shows how the portfolio process can serve as a powerful motivational tool by encouraging students to assess their own work, set goals, and take responsibility for future learning. Throughout the book Hebert relates stories that illuminate the lessons learned -- by the students, teachers, and principal -- from a school that has used portfolios for more than a decade. Rather than prescribing what the portfolio should contain and how it should be assessed, she offers practical guidance, including classroom exercises, for making the portfolio experience a success for the students, the teachers, and the school as a whole.

Power and Portfolios: Best Practices for High School Classrooms

Average customer rating:

Proof There's Power in Portfolios

Power and Portfolios: Best Practices for High School Classrooms
Jim Mahoney
Manufacturer: Heinemann
ProductGroup: Book
Binding: Paperback

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ASIN: 0867095296

Book Description

Portfolios are a driving force in student motivation and growth. Some are so stunning that they are the very models of what writing-reading workshops set out to doto engender in students confidence in their own abilities and to inspire them to become sophisticated users of language. But how do you set up such a workshop and how can you achieve such remarkable results?

For many years, Jim Mahoney has conducted workshops on the workshop approach to middle and senior high school teachers. Now he has written about the day-to-day practices of the writer's and reader's workshop, explaining the theory and the nitty-gritty details of putting together a portfolio in a way that goes beyond being a mere recipe. From his first chapter on the sharing of power to subsequent chapters building on Nancie Atwell's principles of time, ownership, and response, Jim shows how to structure and run a classroom with portfolios as the centerpiece.

And Jim truly practices what he preacheswhen he asks his high school students to write, he writes alongside them or in front of them, using a transparency and letting them see the tentative moves, corrections, and adjustments a writer makes. Literary letters, essays, stories, poemsany and all genres are grist for the mill of producing what Jim calls "a writing state of mind." His success in promoting this state is apparent in the many compelling student samples integrated throughout his text.

If you are interested in making the move from a teacherdirected classroom to a student-centered one, in learning from and with your students, and in sharing the joys and the power of reading and writing, you find no better guide than Jim Mahoney and his Power and Portfolios.

Customer Reviews:

Proof There's Power in Portfolios.......2002-06-18

Jim Mahoney, a veteran high school English teacher, provides us with a look inside his classroom. He successfully used both the writing and reading workshop approaches in his classroom (teaching junior and senior high school students)and gives us specific examples of how he developed his program.

Most helpful to me were the details of the student created portfolio. In Chapter 3, "The Nitty-Gritty Details," Mahoney breaks down the portfolio into its components and explains the hows and whys of each. Throughout the book, Mahoney includes forms he has used in conferences, for student reflection on their Writer's Notebook and Literary Log, and for thorough student self-evaluation. You'll even find creative ideas for the portfolio cover itself (save your pizza boxes).

Mahoney skillfully weaves stories from his own classroom into his explanations and shares with us some exceptional writing done by students. He describes how the portfolios become more than a grade to the students, many of whom are willing to stay after school on the LAST day to perfect their portfolios, even though grades have been given and report cards issued.

Portfolios are a way to give students ownership of their work and to involve them in assessing their own writing. These creations become more than just projects to both Mahoney's students and their families. They become a way to explore their lives and communicate with others in a powerful and moving way.

Average customer rating:

Highly recommended

Yes It's Hard Work

Good Book - needs revising

This is a must read!!!

Terrific read!

It's Earnings That Count : Finding Stocks with Earnings Power for Long-term Profits
Hewitt Heiserman Jr.
Manufacturer: McGraw-Hill
ProductGroup: Book
Binding: Hardcover

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Quality of Earnings

The Dhandho Investor: The Low - Risk Value Method to High Returns

You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits

Financial Fine Print: Uncovering a Company's True Value

The 5 Keys to Value Investing

ASIN: 0071423230

Book Description

An innovative way to see through a company's published numbers to discover its true investment potential

This book gives you a blueprint for finding a great growth stock for the next decade without taking on a lot of risk in the process. Inspired by the writings of Benjamin Graham, It's Earnings That Count examines a firm’s earnings quality from the perspective of a “defensive” investor who wants to avoid committing ruinous mistakes as well as the “enterprising” investor who seeks Wall Street’s next great opportunities. Unfortunately, as recent market history has shown, the traditional income statement is ill-suited to meeting the needs of these sometimes opposing viewpoints. As a result, investors can buy shares of a seemingly profitable company that, in fact, has poor earnings quality.

However, the author’s trademarked Earnings Power Chart combines Graham’s two personalities to reveal, in picture form, whether a company possesses authentic earnings power for long-term growth. Using the world-famous William Wrigley Jr. Company gum-maker as a case study, you will learn how to build these two alternate profit-and-loss statements to protect yourself. Since this book is written in plain English, you do not need to be an MBA or accountant to follow these step-by-step instructions.

Giving investors the tools they need to turn the tables in their favor, It's Earnings That Count covers:

The four limitations of the income statement found in every annual report, 10-K, and 10-Q
A quick-hitting, five minute test to sift out the obvious losers so you can save time and focus on analyzing potential winners
How to spot when a company is forging an Earnings Power Staircase—that’s your hallmark of a low-risk growth stock like Microsoft and Paychex
Why the charts of Lucent Technologies, WorldCom, Enron, and Tyco signaled trouble ahead of traditional income statement.
The 2 earnings power ratios you need before making your next investment
12 ways to check whether management’s interests are aligned with yours
A list of 15 items to check for to make sure the companies in your stock portfolio have a competitive advantage. (Hint: Great growth stocks always have competitive advantages.)
16 kinds of companies to avoid
20 indicators that it may be time to sell

“Well-written, intellectually sound, "accessible" to those who take the time to understand, and a poke in the eye to those who abused our capitalistic system and those (pros) who let them get away with it." -John C. Bogle, the founder and former CEO of The Vanguard Group

"In a single, easy to use index, Hewitt Heiserman captures the essence of growth and value—a most insightful approach to stock picking." -Charles W. Mulford, co-author, The Financial Numbers Game, Director, DuPree Financial Analysis Lab and professor of Accounting, Georgia Institute of Technology.

"Clear and engaging, Heiserman shows how to easily evaluate a growth company's investment potential for both conservative and aggressive investors. The result? The 'cautiously greedy' investor wins." -Tom Jacobs, Senior Analyst, The Motley Fool

“Heiserman’s unique and thorough analysis not only provides methods for avoiding companies with suspect earnings, but also uncovering the true gems that are able to grow well into the future.” -Timothy M. Mulligan, J.D., LL.M., CPA., CEO, Forensic Advisors, Inc.

“Hewitt Heiserman's innovative financial analysis techniques goes a long way towards providing an investor with an extra edge in identifying the growth stocks of tomorrow without being unduly exposed to excessive investment risk today.” -Thornton L. Oglove, Founder, Quality of Earnings Report

"This book lays the groundwork for becoming a successful long-term investor.” -Mark Sellers, Equities Strategist & Portfolio Manager, Morningstar, Inc.

"As an avid reader of investment books, I recommend this book wholeheartedly." -Arne Alsin, Real Money.com and The Turnaround Fund

“In a clear, sound and practical way, Heiserman provides an investment road map that enhances the odds of your becoming a successful long-term investor.” -Robert L. Rodriguez, Chief Executive Officer, First Pacific Advisors and two-time recipient of Morningstar Mutual Fund’s Manager of the Year

"You really do have to understand 'earnings' if you are to succeed long term in investing." -Jim Rogers, author, Adventure Capitalist and Investment Biker

"Heiserman shows investors how to uncover Wall Street earnings quackery and frauds. A must read." -Kenneth Lee, author, Trouncing the Dow

"Like a professional athlete, Hewitt Heiserman Jr. brings intensity and brainpower to the world of investing. You need the graduate school that It's Earnings That Count can provide. Buy the book and do your homework." -John D. Spooner, Director-Investments SmithBarney Citigroup and author of Confessions of a Stockbroker, Sex and Money, and Do You Want to Make Money or Would You Rather Fool Around?

"Great addition to the literature! Hewitt Heiserman has crafted an easy read, basic tutorial on avoiding the most common mistakes caused by accounting phony baloney-combined with some age old investment wisdom. Mandatory for the intermediate investor!" -Kenneth L. Fisher, CEO of Fisher Investments Inc. and Forbes' "Portfolio Strategy" columnist

Customer Reviews:

Highly recommended.......2007-03-29

I am surprised that more investors have not read this book.

This book sets forth an excellent, step-by-step methodology to analyzing stocks that should be of interest to most fundamental investors. The author is a professional writer, and consequently the book is well-written and relatively easy to read even though it also covers some fairly complicated topics. The methods he describes are well thought-out and explained, and I honestly believe they can be of tremendous use to fundamental investors seeking to make investment decisions with respect to particular companies.

Heiserman's main point is that GAAP accounting means that the accrual income statement may not properly reflect the position of a particular company. In this way, he is similar to Marty Whitman (see "Value Investing" and "The Aggressive Conservative Investor") although he is certainly not a traditional value investor. Instead of focusing on book value like Whitman, Heiserman has created a means to adjust the income statement to overcome shortcomings in GAAP to identify companies that are financially sound with strong growth prospects.

His method is to create two new income statements for each potential investment - a "defensive" income statement that will reveal the company's need for outside capital and determine what the company's risk of going bankrupt is, and an "enterprising" income statement that will analyze how effective the company is at earning a return on its capital investment. In this way, Heiserman details a step-by-step methodology to find financially stable companies with strong growth prospects.

Heiserman eschews formulaic investing, meaning that applying his methods takes some time and effort. However, he also sets forth a helpful "five minute test" to enable investors to quickly assess whether it is worthwhile to dig deeper into a company's financials. He also provides good information regarding how to conduct competitive analysis and assess management (although some of the latter information may be dated due to recent SEC disclosure developments). Lastly, because the methods Heiserman has created rely on past financial statements, his methods minimize the possibility that an investor will make overly optimistic assumptions about a company's future prospects.

In all, I would highly recommend this book to intermediate-level investors who are willing to work to uncover individual stocks with sound growth prospects at reasonable prices.

Yes It's Hard Work.......2006-01-30

Calculating the real value of an investment and its potential takes a lot of detective work.

Fortunately for us all Mr. Heiserman has written the gold standard for "The Standard Operating Procedures to Probable Investment Success." Certainly it cannot guarantee it. In most cases it will keep you out of trouble and guide you considerably closer to your goal. Was it Voltaire who once said, "Common Sense is uncommon."

In conjunction with services such as Value Line it offers far better odds at success.

I believe Warren Buffet was once asked, why not do something else and to paraphrase he replied, "Why bother when investing is so simple." If you read the book and apply it you will understand why he said that; simple yes, easy no, hard work yes.

Happily most people will not wish to do the hard work and will continue to purchase investment advisory services hoping that they, with little effort, will be blessed with magnificent returns.

So read the book, work at applying it and you will be amazed; I was. I have a library full of investment books and this is the only one on investments I would take to a desert island.

Good Book - needs revising.......2005-09-20

The concept taught in this book (of the methods used to evaluate a company) is very good.
It's an extra tool to use in evaluating a company - a very sensible tool. The only reason I gave this book 3 stars is because a lot of the figures in the examples are wrong. They refer to the Financial Statements of Wriggley at the beginning of the book, but then they transpose the wrong amounts in the examples.

This is a must read!!!.......2005-06-14

If you are an individual investor serious about developing an indepth approach to stock analysis, this book is a must read.

Instead of following the advice of "gurus" on CNBC with short-term time horizons, this book provides a methodolgy you can use to buy and monitor high-quality stocks. Your stock selections will no longer be shots in the dark. Mr. Heiserman walks you through how to determine the true earnings quality of a company. Also, he discusses the equally important areas of competitive advantage and valuation.

I've follow this methodolgy since 2002 and added it to the investment process I use to select securities for my clients. It has been a tremendous help in avoiding high risk stocks and enhancing the quality of client portfolios.

Please note that you should visit the "About the Book" section of his website (www.earningspower.com) after purchasing the book. Download the .pdf file that includes a few corrections that will help in understanding the examples he provides.

Terrific read!.......2005-05-24

I read this book last fall when it came out, and found it to be a quick, engaging read. Mr. Heiserman is able to bring clarity to what can sometimes be dense subject matter. For an intermediate level investor such as myself, I find it rare to find such insight in a style that allowed me to finish the book in two nights.

The best thing about his approach is that not only does it yield market beating returns, but it does so with the type of sound investments that allow one to sleep soundly.

As with some of the earlier posters, I'd like to thank the author for his generosity in sharing his time and insight. I've exchanged a few emails with him, and he's always been gracious in sharing his insights. In an April 12, 2004 Business Week article (full disclosure: I work for McGraw-Hill), the author picked six stocks which eleven months later were up an average of 37% vs. 5% for the S&P and 3% for the Russell 2000. Will he continue to have that kind of awe-inspiring success? Probably not. Will his methods continue to beat the market over the long run? I'm betting on it.

By sharing some of his picks, Mr. Heiserman has at times given me a fish to eat. By writing this book, he's taught me how to fish. Highly recommended!

Anne Marie Power (Portfolio Collection) (Portfolio Collection)

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Anne Marie Power (Portfolio Collection) (Portfolio Collection)
Anne Marie Power
Manufacturer: Telos Art Publishing
ProductGroup: Book
Binding: Paperback

Textile & Costume | Design & Decorative Arts | Arts & Photography | Subjects | Books

General | Artists, A-Z | Arts & Photography | Subjects | Books

General | Crafts & Hobbies | Home & Garden | Subjects | Books

Textile Arts | Crafts & Hobbies | Home & Garden | Subjects | Books
ASIN: 1902015266

Book Description

Textile artist, papermaker and sculptor, Power plays upon the issues of cultural trafficking and influences between continent and continent.

Business Wire : Qpass Announces its Extended Product Suite; Product Portfolio Strengthens Qpass' Role Providing Software That Powers the Entire Digital Supply Chain.

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Business Wire : Qpass Announces its Extended Product Suite; Product Portfolio Strengthens Qpass' Role Providing Software That Powers the Entire Digital Supply Chain.

Manufacturer: Business Wire
ProductGroup: Book
Binding: Digital

General | Business & Investing | Subjects | Books

Book Description

Word count: 778.

Buying power. (Portfolio).(Editorial): An article from: Mortgage Banking

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Buying power. (Portfolio).(Editorial): An article from: Mortgage Banking

Manufacturer: Mortgage Bankers Association of America
ProductGroup: Book
Binding: Digital

General | Business & Investing | Subjects | Books

Book Description

This digital document is an article from Mortgage Banking, published by Mortgage Bankers Association of America on July 1, 2002. The length of the article is 456 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

Citation Details
Title: Buying power. (Portfolio).(Editorial)
Publication: Mortgage Banking (Magazine/Journal)
Date: July 1, 2002
Publisher: Mortgage Bankers Association of America
Volume: 62 Issue: 10 Page: 4(1)

Article Type: Editorial

Distributed by Thomson Gale

The Citizen Investor: The Power of Ownership

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One of the best books on investing you can buy
'NUKES DAY TRADING APPROACH
No Nonense, Time Tested Advice

The Citizen Investor: The Power of Ownership
Phil Dow , and Paul B. Brown
Manufacturer: RBC Dain Rauscher
ProductGroup: Book
Binding: Hardcover

General | Business & Investing | Subjects | Books

Introduction | Investing | Business & Investing | Subjects | Books

Management | Management & Leadership | Business & Investing | Subjects | Books

General | Personal Finance | Business & Investing | Subjects | Books

Retirement Planning | Personal Finance | Business & Investing | Subjects | Books
ASIN: 0974319007

Book Description

There are no guarantees when it comes to investing.

And if you've heard it once, you've heard it a thousand times, "past performance is no guarantee of future results." And yet, year in and year out, the same companies ouperform the pack. They aren't flashy. And they certainly will not generate the highest returns over one week, one month or one year. Yet, every time you look at the best performing stocks over a three, five, or ten-year (or even longer) period, there they are. Doesn't it make sense to consider making these strong performers a core part of your portfolio? Phil Dow, director of equity strategy for RBC Dain Rauscher, one of the nation's leading brokerage firms, thinks so. Here in straight forward, no-nonsense language, Dow shows you how to identify the market's "Bulldog Stocks" and what you should do with them once you find them. (Hint: You OWN them for the long term.) If it is time to get back into the market, or to readjust your portfolio, THE CITIZEN INVESTOR is a great place to start.

Customer Reviews:

One of the best books on investing you can buy.......2006-01-04

It exposes the secret to investing: There is no secret. Instead this book gives you the common-sense approach to your retirement nearly all of us are going to need. The book points out the challenge we are going to face as fixed benefit pension plans have faded and Americans are living longer. The double-whammy puts most in a box that a "home run stock" cannot get you out of.

Follow the well-spoken Mr. Dow's plan and you will not only retire with the assets you need, you will have the experience of being a business owner (not a trader) with your risks spread over a portfolio of which you can be proud.

Well done, Mr. Dow.

'NUKES DAY TRADING APPROACH.......2004-02-26

Outstanding, easy to read work by a seasoned veteran. The factual real life examples provided strongly supports the notion that making sound investments followed by patience is the key to financial reward. Absolutely "nukes" the day trading investment approach.

No Nonense, Time Tested Advice.......2004-01-14

No fancy slight of hand here. The authors use common sense wisdom to strip away and de-bunk the notion that constantly trading stock certificates will make you rich. In doing so they point to tangible examples of "average" investors who've made large sums by investing in solid companies and holding on while compounding works its magic.

A well written primer for getting into, and staying in, the market. A good book, and a great gift for someone just getting started.

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