Product Description

Before I became “Phil Town, teacher of investing principles to more than 500,000 people a year,” I was a lot like you: someone who viewed individual stock investing as way too hard to do successfully. As a guy who barely made a living as a river guide, I considered the whole process pretty impenetrable, and I was convinced that to do it right you had to make it a full-time job. Me, I was more interested in having full-time fun.

So I was tempted to do what you’re probably doing right now: letting some mutual fund manager worry about growing your nest egg. Let me tell you why that decision could one day make you absolutely miserable.

The fact is, because of natural market cycles, the mutual fund industry is likely to soon be facing twenty years of flat returns. That means that if you’ve got your nest egg tucked away in funds—especially the type found in most 401ks—your egg won’t get much bigger than it is now. Translation: Get ready for a retirement filled with lots of cold cuts, plenty of quality TV-watching time, and a place to live that’s too small to accommodate your visiting kids.

In this book I’ll show you how I turned $1,000 into $1 million in only five years, and then proceeded to make many millions more. I came to investing as a person who wasn’t great at math, possessed zero extra cash, and wanted a life—not an extra three hours of work to do every day.

Fortunately, I was introduced to The Rule.

Rule #1, as famed investor Warren Buffett will tell you, is don’t lose money. Through an intriguing process that I’ll clarify in this book, not losing money results in making more money than you ever imagined. What it comes down to is buying shares of companies only when the numbers—and the intangibles—are on your side. If that sounds too good to be true, it’s because the mind-set I’ll be introducing you to leads not to bets but to certainties. Believe me, if there were anything genius-level about this, I’d still be a river guide collecting unemployment much of the year.

Part of the secret is thinking of yourself as a business owner rather than a stock investor. Part is taking advantage of today’s new Internet tools, which drastically reduce the “homework factor.” (We’re talking a few minutes, tops.) Part is knowing the only five numbers that really count in valuing a potential investment. And part—maybe the most important part—is using the risk-free Rule #1 approach to consistently pay a mere 50 cents to buy a dollar’s worth of a business.

What I won’t waste your time with is fluff: a lot of vague parables reminding you of what you already know and leaving you exactly where you started. This is the real deal, folks: a start-to-finish, one-baby-step-at-a-time approach that will allow you to retire ten years sooner than you planned, with more creature comforts than you ever imagined.






Also available as a Random House AudioBook and eBook.

Product Details

• Amazon Sales Rank: #75038 in Books
• Published on: 2006-03-21
• Released on: 2006-03-21
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 320 pages

From Publishers Weekly
Starred Review. For amateur investors who admire the incredible returns produced by Benjamin Graham–Warren Buffett–style value investing but can't figure out how to replicate these billionaires' methods at home, Town's investment guide is manna from heaven. A former river-rafting guide, Town learned how to calculate such crucial numbers as Return on Investment Capital and Equity Growth Rate from "Wolf," a wealthy rafter whom Town saved from a rapid in 1980. Under Wolf's tutelage, Town learned how to turn $1,000 into $1 million in five years, but the selection of lucrative stocks took weeks of library research. In this engaging and accessible book, Town shows readers how to replicate that sort of exhaustive market research on the Internet—and shorten the research time to just a few hours per stock. Fans of The Intelligent Investor will recognize that Town's Rule #1 formula—"1) Find a wonderful business, 2) Know what it's worth as a business, 3) Buy it at 50 percent off, 4) Repeat until very rich"—is a variation of Benjamin Graham's investment philosophy. (Graham and Buffett are cited heavily throughout the book.) But Town's ability to break down that philosophy into a detailed, step-by-step program that can be understood by any reader with basic math skills is unique. His chummy, reassuring tone ("If you're finding yourself already a bit overwhelmed, take a deep breath") will leave readers feeling empowered and ready to manage their money themselves. (Mar. 21)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

Review
“Town's investment guide is manna from heaven… engaging and accessible… Town’s ability to break down that philosophy into a detailed, step-by-step program that can be understood by any reader with basic math skills is unique… will leave readers feeling empowered and ready to manage their money themselves.” —Publishers Weekly (starred review)

“Extraordinarily readable…provides investors with surefire tools to outperform costly advisors. Follow Town’s simple, time-tested precepts, and even unsophisticated investors will leave most mutual fund managers in the dust.” —Arthur Levitt, author of Take on the Street and former Chairman of the Securities and Exchange Commission

“A really smart, homework-driven read that tells you precisely how to do it. Rule #1 may be the clearest and best book out there to get you on the path to riches. This one’s special!” —James J. Cramer, host of CNBC’s “Mad Money” and Markets Commentator, thestreet.com

“Rule #1 is an investment Bible for our time. In fun, easy-to-understand words, Phil Town tells you how to buy quality stocks at a discount.” —Rich Karlgaard, publisher, Forbes magazine, and author of LIFE 2.0

“For the individual investor, Rule No. 1 should be, ‘Read Rule #1.’ This book debunks a lot of myths in the market and provides pearls of common-sense wisdom…Indeed, Rule #1 rules.” —Gene Marcial, Senior Writer, Business Week

“Rule #1’s common-sense, pragmatic approach is money in the bank.  This step-by-step guide is methodically researched and terrifically accessible … Can you really beat the mutual fund mangers and so-called experts at their own game?  He...

Review
“Town's investment guide is manna from heaven… engaging and accessible… Town’s ability to break down that philosophy into a detailed, step-by-step program that can be understood by any reader with basic math skills is unique… will leave readers feeling empowered and ready to manage their money themselves.” —Publishers Weekly (starred review)

“Extraordinarily readable…provides investors with surefire tools to outperform costly advisors. Follow Town’s simple, time-tested precepts, and even unsophisticated investors will leave most mutual fund managers in the dust.” —Arthur Levitt, author of Take on the Street and former Chairman of the Securities and Exchange Commission

“A really smart, homework-driven read that tells you precisely how to do it. Rule #1 may be the clearest and best book out there to get you on the path to riches. This one’s special!” —James J. Cramer, host of CNBC’s “Mad Money” and Markets Commentator, thestreet.com

“Rule #1 is an investment Bible for our time. In fun, easy-to-understand words, Phil Town tells you how to buy quality stocks at a discount.” —Rich Karlgaard, publisher, Forbes magazine, and author of LIFE 2.0

“For the individual investor, Rule No. 1 should be, ‘Read Rule #1.’ This book debunks a lot of myths in the market and provides pearls of common-sense wisdom…Indeed, Rule #1 rules.” —Gene Marcial, Senior Writer, Business Week

“Rule #1’s common-sense, pragmatic approach is money in the bank.  This step-by-step guide is methodically researched and terrifically accessible … Can you really beat the mutual fund mangers and so-called experts at their own game?  Hell yes!” —Jonathan Hoenig, Portfolio Manager, Capitalistpig Hedge Fund, and regular contributor to Fox News Channel

“Rule #1 is probably one of the most inclusive, no nonsense, fundamental books about investing in the stock market I’ve ever read. This book is a must-read for everyone; from beginner students of the market to super know-it-alls.” —Danielle Hughes, President and CEO, Divine Capital Markets LLC

“A refreshing departure from those boring investing books… If you're tired of being shut out of how exactly the rich guys on Wall Street make money, this important book will teach you how to run with the bulls. It's priceless.” —Elizabeth MacDonald, Senior Editor at Forbes Magazine; regular, “Forbes on Fox”

Customer Reviews

Helpful
I ordered this book sight unseen from Amazon because of the advanced reviews. If I had seen it first, I *might* not have bought it. But I'm still glad I have it anway.

What I really like about this book is that it explains key financial figures for calculating the future worth of a company and for deciding what a good price would be to pay for the company today (in terms of the paid stock price.) This aspect of the book is invaluable and is easily worth the cost of the book.

What I don't like about the book is the presumption that you can just sit down, at any given time, and with a little research, quickly find a company that's on fire sale and that will safely reap 15% a year or more, for many years out. It takes special circumstances to find companies in such positions. One of the author's inspirations, Warren Buffet, has not found many such opportunities for years now, which is why he is sitting on 46Billion in cash. He can't find anything to buy that's cheap enough and that would meet the author's criteria!

So the author is disingenuous in suggesting that you, after reading the book, and putting in a few minutes a week looking at web sites, can discover a gem that the greats like Buffet haven't been able to find. Bargains like this don't come along everyday. But they do come along over time.

And that's why I ended up really liking this book. The author's instructions on how to find such gems thrown into the trash by the market, when such situations occur, is the clearest, best, and simplest description I've come across (and I have no less that 3 sagging shelves of investment books.) I'm going to use the information the author gave so that, when the market tanks, say, I can pick up some of the great companies he describes and KNOW, because of his formulas, that I'm buying a jewel at a bargain basement price. I'd been looking for that information for some time, thus, in the final analysis, I really do value this book.

Rule#1 Rules!
Overall this is the best investment guide I've found yet. Rule #1 is "Don't lose money." Fair enough; no one wants to lose $$. But how? The author answers that question. First, buy wonderful companies. For Town, that means companies with strong and consistent growth: 10% minimum average annual growth for EPS, free cash flow, sales, and book value for the last 10 years. Efficient, well-managed companies, with great return (10% or higher) on invested capital. Once you've found that company, determine the fair value, and buy it ONLY when it's at a 50% discount, thus giving you a "margin of safety" against the vagaries of the "Mr. Market."

He makes it sound easy, but it's not. He admits that it can take 4-8 hours of research on each company to determine if it's "wonderful" or not. And even after you've done a preliminary search with a stock screening tool, you might have to research dozens of companies to find one that's wonderful AND trading at a 50% discount.

One great feature of this book is that Town provides a fairly simple method for determining the fair stock price of a company. This is a notoriously difficult problem, but Town's method is quite good. The problem is that you have to determine the expected growth rate of the company and the future PE ratio. He provides methods for doing so, but the process is necessarily quite speculative. But if you're going to invest in stocks (as opposed to mutual funds), this difficulty is unavoidable. At least his method is fairly rigorous and scientific. There is little guess-work. Town recommmends buying only when the price is at least 50% below the "fair value price."

Once you've chosen a "wonderful" company and sunk your life savings into it, Town outlines a trading strategy designed to avoid losing your money (rule #1). His trading method relies on 3 technical analysis indicators, MACD, Moving Average, and Stochastic. These indicators are easily available at many free stock charting sites. Basically, you trade out when the trend is going down, and trade back in when it's going up. It's therefore a form of market timing, which is very controversial and tricky. The advantage is that you will avoid the big market meltdowns like 2000-2002. Even if you don't know anything about technical analysis, his method is easy to follow. On the other hand, if you don't feel comfortable market timing, you can buy and hold, and still presumably do well if you've chosen your stock according to Town's guidelines.

According to Town, anyone who follows his method is guaranteed to get 15% minimum annual return in any market conditions, thus doubling your money every five years. Unfortunately, there are no "sure-fire" methods for getting that kind of return, especially in a bear market. But in any case, he still provides a detailed, coherent, and understandable method for finding great companies to invest in and avoiding losses.

A Lower Risk Way to Be a Momentum Investor
This book surprised me by marrying together several common methods for investing in stocks for above average returns. I don't recall any other book advocating this particular combination. I was intrigued enough to begin a test of the method. It's too soon to see how it will go, but I suspect that I may be able to improve my returns. Time will tell.

Rule #1 as most investors know is to avoid losing money. That's because it's too hard to make up losses. So you pull out quickly before a position weakens very much according to this book . . . in fact, faster than most people do now. But it's good to have a sell discipline and most books are pretty weak on that point.

The book begins with a variation on the Benjamin Graham and Warren Buffett school of investing . . . buy $1 worth of a fine growth company for 50 cents. He urges you to buy quality companies at an attractive price based on a ten year perspective for growth in and high levels of return on invested capital, sales growth, e.p.s. expansion, and book value per share growth.

Then, he turns to a few technical rules to buy and sell positions quickly based on a combination of MACD (using a 8-17-9 test), relative stochastics (using a 14-5 test triggered at the 20th and the 80th percentiles), and stock price compared to a 10 day moving average. When all are positive, buy. When all are negative, sell.

If you don't know what those measurements are, the book will explain them for you. They sound more complicated than they are.

If you follow this approach rigidly, you should pick up on the middle part of a major up move and be out before the stock price can decline very much to eliminate your profits.

The book provides considerable detail on how to acquire these statistics for free on the Internet. And that's where I had a quibble. I tried to follow his advice for making the weighting adjustments to what MSN Money provides automatically . . . and I couldn't find a way to make the adjustments. So I'm using the standard weightings on Yahoo Finance instead. Perhaps it's that I'm not very good at following directions . . . or perhaps because I use a non-standard browser . . . but I gave up after two hours of futile efforts.

I also don't think you can really pursue this approach in 15 minutes or less a week. If you get into a volatile position during a time of market gyrations, you'll need to spend more like a half hour a day . . . unless you are only looking at one stock.

But if you had used this approach during the Tech bubble, it would have saved your bacon. That's how the author was able to keep his hands on the 7 figure value of the portfolio that he pyramided from a small initial investment in the late 1990s.

Anyone who wants to have a new approach to high return investing should definitely examine this book.

Very interesting!