F Wall Street: Joe Ponzio’s No-Nonsense Approach to Value Investing For the Rest of Us

334 Pages·2009·1.72 MB·English

by  Joe Ponzio

FWALL
STREET
JOE PONZIO’S NO-NONSENSE APPROACH TO
VALUE INVESTING FOR THE REST OF US
Joe Ponzio
Founder of www.FWallStreet.com
The author would like to thank Mr. Warren Buffett and Mr. Charles Munger for granting permission to
reprint certain quotes and parts of annual letters sent to shareholders of Berkshire Hathaway.
Copyright © 2009 by Joseph Ponzio
All rights reserved.
This book, or parts thereof, may not be reproduced in any
form without permission from the publisher; exceptions are
made for brief excerpts used in published reviews.
Published by Adams Business, an imprint of Adams Media,
a division of F+W Media, Inc.
57 Littlefield Street, Avon, MA 02322. U.S.A.
www.adamsmedia.com
ISBN 10: 1-60550-000-3
ISBN 13: 978-1-60550-000-3
eISBN: 978-1-44051-975-8
Printed in the United States of America.
J I H G F E D C B A
Library of Congress Cataloging-in-Publication Data
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—From a Declaration of Principles jointly adopted by a Committee of the
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For information, please call 1-800-289-0963.
To my children: Always remember what papa said, “Why buy toys when you
can buy the toy store?”
Acknowledgments
When I sat down to write this book, it was April of 2007. The markets were
flying high while Wall Street was celebrating a real estate and hedge fund boom.
I saw a lot of problems developing and knew that a lot of investors were going to
get hurt thanks in large part to Wall Street’s ignorance . . . again. At that time,
the thought of a book entitled F Wall Street seemed ridiculous. So ridiculous, in
fact, that I was prompted to change the name of the book to something “softer.”
I feel grateful that Jon Malysiak at The Jonathan Scott Agency believed
enough in this (then) poorly timed and harshly named project to give me a leg
up. It takes a lot of moxy to promote a book entitled F Wall Street; it takes even
more moxy to have the courage of your convictions. Jon has been one heck of an
agent.
Through Jon, I was introduced to the fine folks at Adams Business. My
experience with Brendan O’Neill and Wendy Simard have been nothing short of
spectacular. I would also like to thank the unsung heroes of the art department,
the layout team, the marketing team, and everyone else at Adams who exceeded
my wildest expectations.
I must also thank Lisa Schuble of Champagne PR in Chicago who worked
tirelessly to promote this title. I set the expectation bar high and she nonchalantly
stepped right over it.
In addition to thanking Warren Buffett and Charlie Munger for allowing me to
use their copyrighted material, I’d like to thank these two gentlemen for
generously distributing their wit and wisdom—sometimes in spoonfuls;
sometimes by the bucket—so that others could learn how to invest intelligently.
I am very fortunate to have a business partner and friend in Mike Trekas. Few
people could wear as many hats as Mike without wanting to kill their business
partner. But for Mike, it’s all about our clients and investors. He truly embodies
our “no nonsense” policies at The Meridian Business Group.
Undoubtedly I would not have written this book, much less been involved with
investing, had it not been for my late father, Dr. Alex Ponzio. His passion for the
markets ignited mine. Together with my mother, Sue Ponzio, they created a
household that fostered growth, creativity, and passion in everything we do.
Without my other parents, Dr. Manuel and Encarnita Grimaldi, The Meridian
Business Group would be nothing more than a dream. My father-in-law helped
form the company, and gently reminded me that nobody goes anywhere without
getting a leg up from someone else, no matter how large or small, noticeable or
not.
Finally, I’d like to thank my beautiful bride Angela and our children, Carmen
and Paul. The kids inspire me to become a better papa; Angela inspires me to
live life without regrets—to live life My Way.
Contents
FOREWORD
INTRODUCTION
PART I
GETTING BACK TO THE BASICS
CHAPTER 1
Change Your Perspective
CHAPTER 2
This Is a Football
CHAPTER 3
How Businesses (and Their Stocks) Grow
CHAPTER 4
Net Worth in Business
PART II
HOW TO APPROACH INVESTING FROM A BUSINESS
PERSPECTIVE
CHAPTER 5
Invest Like It’s 1966
CHAPTER 6
How to Value a Business
CHAPTER 7
Forget Price—Focus on (Intrinsic) Value
CHAPTER 8
No-Brainer Investment Opportunities
CHAPTER 9
Real-Life Examples
PART III
MANAGING A PORTFOLIO OF WONDERFUL OPPORTUNITIES
CHAPTER 10
Time to Buy . . . But How Much?
CHAPTER 11
Tracking the Value of Your Businesses
CHAPTER 12
When to Sell
CHAPTER 13
Workouts
PART IV
THE PSYCHOLOGY THAT WILL DRIVE YOUR INVESTMENT
SUCCESS
CHAPTER 14
What Type of Investor Are You?
CHAPTER 15
The Basics of Buying Bonds
CHAPTER 16
Patience—It’s Not a Virtue; It’s the Law
GLOSSARY
QUESTION AND ANSWER
ABOUT FWALLSTREET.COM
BIBLIOGRAPHY
FOREWORD
“There must be a better way!”
At a very young age I became extremely fascinated with money. I knew very
little about how to earn it and make it grow, but I knew I wanted a lot of it. I
guess many young kids get caught up in the “I want to be a millionaire” mindset
when seeing their favorite athlete, movie star, or singer with all of the fancy
material items. I never had any of that growing up. Money was always tight;
still, we got by. But “just getting by” was not acceptable for me. It pained me,
even at a young age, to see my parents struggle to provide a better life for our
family.
Worse yet, nobody wanted to help us because we didn’t have a big stock
portfolio.
When I first started my career in the financial services industry as an
investment advisor, I began to realize that I was being trained not to give sound
financial advice but rather to push the hot, new investment product of the month.
Every few weeks a wholesaler (a person dressed up in really expensive clothes
who would try to convince us that his or her investment was the best out there)
would stop by and take a group of us out for a very nice dinner and pitch his or
her investments. It almost felt like our investment decisions were not made by
the quality of the investment, but rather by who would give us advisors the best
perks. That concept really started to bother me, and I lost sleep over it. I knew
that people were relying on me to make the best investment decisions for them,
and this definitely was not the best way of allocating client funds. My clients had
worked very hard to build up a nest egg for themselves; I was not going to be the
one responsible for letting that nest egg crack.
I often reflected on how hard my parents worked to save the money that they
did. Increasingly, I saw myself as being one of those advisors who could destroy
it all. I wasn’t really allowed to invest outside of what the wholesalers and the
firm told us to do. It began to haunt me, and I would wake up in a cold sweat.
One day, as I saw the next thirty years of my life flash before my eyes, my chest
tightened up. I would be miserable day in and day out, going through the