by John Burr Williams
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Product Description
This book was first printed in 1938, having been written as a Ph.D. thesis at Harvard in 1937. Our good friend, Peter Bernstein mentioned this book several times in his excellent Capital Ideas which was published in 1992. Why the book is interesting today is that it still is important and the most authoritative work on how to value financial assets. As Peter says: "Williams combined original theoretical concepts with enlightening and entertaining commentary based on his own experiences in the rough-and-tumble world of investment." Williams' discovery was to project an estimate that offers intrinsic value and it is called the 'Dividend Discount Model' which is still used today by professional investors on the institutional side of markets. Appendix, Tables, Index.
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Average Customer Review:
1 of 1 people found the following review helpful:
 A masterpiece - but not for everyone., 2008-10-17
This book laid the foundation of business valuation for making investment decisions using the technique we now call Discounted Cash Flow. The fundamental idea of the book is that a business is worth the dividends it will pay in its entire lifetime, discounted at an appropriate interest rate. This idea of true or intrinsic investment value was proposed earlier by other authors, but it was developed and matured in this book. These days many companies do not pay dividends but the underlying principle of valuation is the same.
I found this book interesting because it is a rigorous derivation of the mathematical formulas used in valuation. I also consider it a masterpiece because of the intense insight of the author, which goes way beyond most of the modern day economists and investors. In fact, this is probably the most impressive book on investing I have studied. But it takes effort to read, requires good mathematical skills, and as it is posed as a scientific thesis it does not lend itself well to practitioners looking for a quick how-to guide.
So in spite of this book being an impressive intellectual achievement I have deducted one star in its rating, because it is certainly not for everyone and there are more recent books which will serve the general investor audience better.
1 of 1 people found the following review helpful:
 Incredible Classic, 2008-05-15
A fantastic accomplishment. All investors should study this book to learn the real value of a stock.
0 of 0 people found the following review helpful:
EXCELLENT, 2008-01-07
This is an excellent copy of an investment classic. VERY happy with the seller, the shipping and packaging were superb. Thanks again!
8 of 8 people found the following review helpful:
Awesome book on classical valuation, 2007-01-04
This is probably one of the oldest, if not the first, serious academic works on valuation. The coverage is highly theoretical compared to the more practical valuation books of today (dividends are used instead of free cash flow, continuous time is used instead of discrete time, and "cookie cutter" product cycle scenarios are presented instead of more complex business forecasting).
The real value of this dissertation-turned-book though is its general insights. Although Warren Buffett doesn't tout this book as often as Graham's "Intelligent Investor", you will find that he utilizes the insights from this book almost as frequently.
Robert Stephenson-Padron
MSc student (economics & finance)
University of Navarra, Spain
12 of 14 people found the following review helpful:
 An important work, 2006-06-15
The Theory of Investment Value is clearly an important work, as reflected in Benjamin Graham's citations to it and the prevalence of the dividend discount model in valuing stocks. The theories expounded in this book are of particular import to those to seek to by stock at a value less than the intrinsic value of a company as they determine it to be.
The book itself initially appears intimidating, as there are a lot of mathematical equations, but in reality, the math is nothing more than simple algebra, mostly different models related to computing dividend values going forward.
I found the book to be an interesting read, but it is highly theoretical in nature. The central theme of the book is that stocks are worth the present value of their dividends, paid in perpetuity. It does not discuss earnings manipulation, effect of dilution, securities with superior or inferior claim to payment, etc. Moreover, as Graham points out in Security Analysis, companies that have a high return on invested capital would be well advised to reinvest their profits, while less successful companies would be better off paying higher dividends (relative to book value). This would, of course, tend to make the practical application Williams' theory somewhat complicated, insofar as it makes computing future dividends more difficult.
Readers looking for a more practical guide to valuing stocks might be better served reading Securities Analysis by Benjamin Graham, or any number of more "practical" books related to stock market analysis, particularly as those analyzing financial statements to determine the intrinsic value of a company. Some readers might also find "The Aggressive Conservative Investor" by Marty Whitman and Martin Shubik to be a good read for a competing view, since the authors of that book take the position that, with respect to non-controlling shareholders, a company's stock is worth the net after-tax cash that they expect to realize in the future, whether from dividends, liquidating events, etc. However, if a reader is truly interested in obtaining an understand of how dividends affect stock prices, the book is a worthy read.
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