Buy this book at Amazon.com or try Amazon.co.uk in England, Amazon.ca in Canada, Amazon.de in Germany, Amazon.fr in France, Amazon.it in Italy, Amazon.es in Spain. ASIN=1418421057, Category: Investment, Language: E, cover: PB, pages: 228, year: 2004.
Book review © (2005) by interesting-books-selector.com
This book was written by Belmonte under his penname "Dr. J. B. Farwell", see http://www.buffettandbeyond.com.
It explains a mechanical investing method which sells once a year the stocks which no longer qualify the "clean surplus" criteria. Coincidentely, the clean surplus method beats the Dow and the S&P500 exactly until the end of 2002, when the book's performance statistics end, but I've not found any hint in the book that these annual rebalances are taxable. When comparing an investement method with index investing (e.g.: S&P500), taxes should be considered, otherwise performance is not comparable. On the author's website the performance data of his clean surplus method for 2003 and 2004 are less stellar in comparison with the indices:
Year | DowTopDogs | S&P500 ============================= 2004 | 8.7% | 9% 2003 | 21.2% | 26.4%which for the years 1987 to 2004 results in a CAGR (compounded annual grwoth rate) of 18.32% which compares to S&P500's 12.85% for the same period; only for S&P500 index investing which is an unmanaged index, you don't need to pay taxes until you sell because there is no annual rebalancing.
The author of this book claims that W. E. Buffett also uses the clean surplus accounting method
when calculating the buy-price of a security, but Buffett considers more parameters
than retained earnings and growth for ten years out -
and Buffett surely doesn't use Beta for calculating risk, as the author does.
Generally I'd say, this book is not about Buffett nor his investing method. The book even tries to go beyond Buffett (i.e., maybe not only beating the indices but beating Buffett) and letting the computer choose the stocks in your portfolio while you go to the beach. As in the case of random walk, there might even be a 50% chance that the clean surplus method presented in this book will actually beat the main indices in the future - before tax.
The book contains numerous repetitions and to me the text layout (headlines and boldface in summaries) looked unesthetically. Even if these shortcomings could be elimininated, IBS couldn't recommend this book.
If you want to know the key to long-term success, read Buffett's letters to the shareholders.
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