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Interview with Glen Arnold, author of Valuegrowth Investing

PE: What will the book do for the reader?

GA: Give insight into the key factors needed to evaluate a share leading to an ability to pick winning investments. Provide important rules to prevent your weaker emotional side urging you to make silly investment decisions

PE: Who did you have in mind when you wrote this book, and how might it help them?

GA: Investors with some knowledge of investing needing to fine-tune their stockpicking techniques. Investors need to view stocks as shares of businesses and not as gambling counters in a game.

PE: If we read your book, what will we get better at?

GA: Analysing businesses and creating barriers to prevent emotions from destroying your wealth.

PE: What's going on in the business world today that your book has something important to say about?

GA: Investors know they made a big mistake by not following sound investment principles in the 1990s bubble. They did not bother to analyse the underlying business. This book shows to those investors that truly realize the folly of not investigating a business the way to go from here.

PE: Itís an interesting title for a business book, what lies behind it?

GA: Investors generally view the "Value" investing method as opposite to the "Value" method. As Warren Buffett pointed out in 2000 this does not make sense. Growth and value go together Ė you need to identify companies that offer good returns. That requires that the shares are good value given the growth prospects.

PE: If there is one critical message that you would like readers take from your work, what would it be?

GA: Investment is about sound analysis of companies, forming reasonable expectations of returns and not gambling

PE: What in the world of management has done most to create the need for this book?

GA: The failure of most professional investors to achieve good returns for investors. They have not been following the "Valuegrowth rules"

PE: How does your book differ from/build on the work of previous books on this topic?

GA: It builds on the writings of the great investors of the twentieth century and the resent developments in the field of strategic analysis and finance theory

PE: All interesting stuff, so how should we go about putting it into action tomorrow?

GA: Start behaving like an investor, not a speculator. Know what you are buying a piece of.

PE: If we want to explore or implement these ideas further, what should we do?

GA: Follow the rules set down in the book. If they are to onerous for you (because they do require considerable commitment) then find a professional investor who understand the importance of analyzing a few companies in detail rather than trying to follow 1000s.

PE: Do management ideas like this have a real impact on what executives do day to day?

GA: The ideas in the book should have an impact of fund management and stock analysts. However, it would seem that a mere fraction of 1% follow these basic ideas. Most are far too short-term focused or have never learnt to analyse businesses properly to be able to out perform the stock market indices. But then, if every one was using the Valuegrowth method there would be fewer investment bargains out there

PE: Which "big idea" has had the greatest impact on the way you work?

GA: Share valuation is much like valuing a corner shop. You would not buy a corner shop business without investigating it thoroughly (Sales, margins, long-term prospect, competence and honest of staff, etc.) so why do you throw thousands of dollars into companies you know little about?

The punch-card approach to investment: imagine you have a punch card with 20 punches on it. This has to last you your entire life. You punch the card each time you invest in a company. This makes you think seriously about each move. (transaction costs do not destroy your pot of money either)

Invest with the intention of never selling (you might change your mind as circumstance change, but the intention at the outset was to hold to infinity) How many stocks would fulfill that criteria? Not many. So you narrow down your search to companies with excellent long-term prospects. This conclusion is based on proven ability of the company to deliver.

The first rule of invest (as Warren Buffett says) is not to lose money. The second is not to forget the first.

Invest, donít speculate

Ignore Mr Market and his manic-depressive moods. Buy if the market is throwing shares away cheap. Donít base your valuation of the markets valuation.

PE: Finally, any questions that you'd like to ask your readers?

GA: Are you prepared for the hard work that is entailed in out-performing the market indices? After the 1990s you should be aware that easy returns are temporary without sound principles Ė they are just an illusion. A Valuegrowth investor would not have touched any dot.com or high flying telecom company in the 1990s because the underlying business was not analysible. What made you think you could understand owner earning levels for these companies years from now?

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