Book Review: The Wall Street MBA

This book, by Mr. Reuben Advani, sets out to cover much of the pertinent information required in an MBA program within its pages, and I think it does a good job of meeting this goal.  Mind you, I don’t have an MBA degree so I can’t say with certainty that the goal is accomplished, but I’d have to say that the book does an excellent job of hitting all of the important points of required knowledge, specifically as it relates to investing and individual company valuation.  I liked this book, but then again I’m kind of an out-of-the-ordinary accounting/investing geek.

Where I have some confusion with this book is in understanding who is the target audience.  The problem is that the subject matter gets pretty involved in accounting principles that can be overwhelming to the average individual – potentially so much that the average individual may lose interest.  On the other hand, if an individual is a professional who already understands these concepts well enough to follow the book, then that individual probably doesn’t need this book, except as a refresher.

Perhaps the mid-point between a novice and a professional is the target audience.  Someone who has a passing understanding of accounting and investing principles, but who needs a more in-depth explanation of how the principles interact to help with investing activities.

Mr. Advani starts off with a comprehensive overview of basic accounting, which can be helpful if you’ve never had an accounting course or if you need a review.  Mingled in with this overview is an example company, which helps to understand the principles as they are explained.  After that, Advani reviews how this knowledge of accounting can be used to help you understand the relative health of a company as you consider it for investment.  Again, this is good information to know, but I’m not positive that it would be all that useful to the average investor.

One problem that the average investor has when encountering this information is the supposition that knowing how to understand the value of a company is going to somehow make investing in individual companies something of an exact science.  Anyone who has spent much time considering investments, whether as a professional or as an individual investor, can attest to the fact that investing is far from an exact science.

Any number of bad things can happen to an otherwise healthy company – whether it is a downturn in the sales cycle, corruption in the boardroom, labor strife, or the overall economy causing issues.  No matter how much effort is put into reviewing the accounting and valuation of a company, these and may other possible uncontrollable things can cause problems for the company.  It is for this reason alone, the single company’s exposure to risks, that the average investor is not well-served by individual company investing.

Having said all that though, I still believe that this book is a very good resource for the individual who finds him- or herself in a position of reviewing company’s annual report for whatever reason.  I think Advani does a good job of explaining all of these principles in a format that is understandable to the person with little background with this sort of review.  In particular I liked the final couple of chapters, where Mr. Advani gives a rundown of the principles of investing in currencies, real estate, and commodities – areas that often don’t get much attention in explanation.

The above book review is part of a series of reviews that I am doing in an arrangement with McGraw-Hill Professional Publishing, where MH sends me books with the only requirement being that I read the book and write a review – like it or not.  If you find the information in this review useful, let me (and McGraw-Hill) know!