Why Stocks Go Up and Down, 4E

by William H. Pike, Patrick C. Gregory

Why Stocks Go Up and Down is an in depth introduction to stocks and bonds. It explains the basics of of financial statement analysis, cash flow generation, stock price valuation, and more. Commonly misunderstood terms such as "capitalize," "equity," and "diluted earnings" are explained clearly. Stock valuation methods including price/earnings ratio, price/cash flow ratio, and Enterprise Value / EBITDA are covered. The book is about fundamentals; it is not an investment system or "how to make a million dollars in the market." The subtitle, "The Book You Need To Understand Other Investment Books" says it best. That subtitle is the result of comments received from readers over many years.

Genres: Finance, Business, Economics, Money, Nonfiction, Personal Finance, Personal Development

432 pages, Paperback

First published January 1, 1983

Reviews

[Salar Moarref · Rating 5 out of 5]

A very well-written introduction to stock market and the language of the Wall Street. The book explains in simple language how a company is formed, how it goes public, different ways a company can raise money (loans, stocks, bonds, etc.,) and how each approach affects the shareholders and investors. It then covers common metrics that are used to evaluate a company’s performance and efficiency, and gives tips to investors on what to look for in a company’s financial reports. The terminology and concepts are then used to explain why stock prices go up and down. The book ends with an interesting case study where a pharmaceutical company’s data is analyzed from different aspects to determine the value of the company’s stock for an investor. Why stocks go up and down is a great book for beginners and people who are curious about stock market.

[Tom · Rating 5 out of 5]

This is a fantastic book about basic fundamental knowledge that can be useful to anyone. I really recommend this book if you would like to learn more about starting a business, financial statements and analyzing them, financing a business through stock issuing or bonds, cash flow and evaluation ratios etc. Having read a lot of finance and investing books, I did not have problems with terminology, but even if you are a beginner, authors prepared nice glossary at the end. This is also one of the finance books that you can really enjoy reading.

I want to thank both William H. Pike and Patrick Gregory for the effort they've put into this book. Great stuff for beginners, but also for professionals. Thank you ever so much.

[Phat Nguyen · Rating 5 out of 5]

A good overview with enough in-depth information about stocks and bonds that could prepare you for more serious books about security trading.

[Fotis Koutoulakis · Rating 5 out of 5]

Excellent one with a robust level of technical detail on stocks, bonds and how to value companies.

Recommended read if you want to get past the rudimentary understanding most of the pop finance books give on stocks/bonds.

[Stefanos Baziotis · Rating 5 out of 5]

I really like that this book explains pretty much everything that is relevant in opening a common-stock company from first principles.

[Mina · Rating 5 out of 5]

A must read if you have any curiosity about the stock market.

[Francisco Rodríguez · Rating 3 out of 5]

It really delivers in explaining what the title says. It's however... extremely... boring. The first ~80% of the book explains accounting in companies: 'exciting' stuff like what is a stock, a bond (which, I learned, is basically like being the bank and giving money to a company that has to pay you interest and capital back), amortization, balance sheets, all sorts of boring ratios for companies, etc. it is all explained very clearly and really does teach the concepts, but it was indeed boring. I forced myself to push through it. At the end, and only at the end, we are ready to learn the Why that answers the book's title. So I now know why. Thank you.

[Michal Palczewski · Rating 5 out of 5]

This contains the nuts and bolts of stock investing and valuation. After this book you will know what all those different lines on a companies financial statement mean and should have a decent understanding of corporate accounting. Very useful for investing in stocks, because it allows you to make your own analysis. Works well with other books like Magic formula and such because now all those details make more sense. I wish I read this book before reading some of the other ones like security analysis, because there would have been less things that went over my head.

[José · Rating 4 out of 5]

This book is mostly about understanding financial statements for a company (balance sheet, income statement, cash flow statement), as well as financing for a company (basically, issuing stock and issuing debt/bonds). In other words, it's a book about the components that go into fundamental analysis. To that end, it presents very thorough explanations of the key concepts, with examples that felt relatively easy to follow. That said, I felt like it didn't tie these concepts together satisfactorily, and it doesn't really address the "why stocks go up and down" in as complete a manner as I wanted (it ignores technical analysis, and it doesn't talk too much about external factors to stock prices like interest rates, etc).

I think this is a great book to read, and it was useful because I didn't know as much about fundamental analysis; I just think it should be called something else (maybe "Core Fundamental Analysis"?).

[Joyce · Rating 4 out of 5]

The good:
This book explains accounting and financials in a easy to read and understand manner

It is a good primer if you are just starting out, broadly comprehensive

Once you read this book, you can read more specialized books in each area this book covers

The bad:
The stock principles and suggestions mentioned in the book is speculation rather than value investing.
Examples:
(1) the author recommended to sell the stock when it decreased in price, without considering change in value.
(2) the author recommended to value the stock based on historical PE ratio range, which in itself is based on market pricing and speculation. It is speculative because historical PE range is based on opinion of other players rather than fundamental value in the business
(3) the author recommended to make profit by anticipating the perception and next step of market players. This is the definition of speculation according to Ben Graham

[Anže Novak · Rating 5 out of 5]

One of the best books (if not the best) in my opinion for beginners in the investment industry. But is also resourceful for professionals. It covers all the basics of financial statement analysis, how to valuate a company and compare it to its peers in the industry. You get a glimpse of how a company operates, how it raises money and all the different ratios that you need in order to complete your investment decision.
I know now why Michael Burry highly recommended this book. It truly is great.

[Yury · Rating 4 out of 5]

It is a good book, unless you want to be an investor. This is a good introduction into the language of Street, but do not take it too seriously. Do not expect to become Buffett after reading it. The what-causes-what part is make-believe trickery. Please do yourself a favor and read some Mandelbrot's "Misbehavior of Markets" to understand how high your chances to make a profit from investing. Things are not so easy when it comes to forecasting P/E, earnings and so on.

[Ronak Karsan · Rating 3 out of 5]

Great book that provides stock and accounting fundamentals. While this book does a great job of explaining stock and accounting concepts, I do think some parts of the book were dry and dragged on a bit too long.

Overall this book is a great guide if you want to learn some basic business and accounting principles.

[Oswaldo Rhyslie · Rating 5 out of 5]

A book with strong fundamentals and concept on stocks as an investment tools
the only downside of the books is its language with many terms that need to be remembered and could be challenging for laymens

[Tomonaut · Rating 3 out of 5]

Takes you, with simple examples, trough the process of a starting business and how shares come into existence, how to evaluate their prices trough accounting metrics and other stock valuations. Nice read.

[Sebastien · Rating 4 out of 5]

Pike assumes you're a total noob idiot at the beginning, and thankfully so. He gradually increases the difficulty so that you can follow along. Really interesting read. I now want to start a mouse trap factory out of my shed.

[Sean · Rating 4 out of 5]

Gonna read this to my kids. Would change many financially illiterates lives for the better

[Lucas · Rating 5 out of 5]

Great book about investing!

[Elizabeth · Rating 5 out of 5]

Basic but solid.

[Deepanshu · Rating 5 out of 5]

Since this is the first book on securities and investing, information inside this book is most valuable for.

[Ronald · Rating 5 out of 5]

Excellent introduction to the essential financing and accounting knowledge every man needs, regardless of investment methodology.

[Yohanes Hansen · Rating 5 out of 5]

mind blown, open to whole new concept of economy [companies]

[Bhanu Pratap · Rating 5 out of 5]

Good book for reviewing and developing a base for investing. Should have added more use cases apart from ABBOTT.

[Luotenrati · Rating 5 out of 5]

Really informative for someone who has no idea about investing or stocks or bonds at all. It goes through all the steps a company can use to raise profit and explains all the various types of offerings and accounting in an accessible and easy to understand way. In my opinion it should be the first book someone should read on investing because it covers all the concepts that the later books assume you are already familiar with.

[Alvaro Sánchez · Rating 5 out of 5]

Indispensable para quien quiera entrar en el mundo de las inversiones.

[Siddharth Gupta · Rating 4 out of 5]

A contemporary book on the basic machinations of the equity market. Easily qualifies as one of the best introductory texts of the field. Comprehensive in the sense that the theory is tightly bound to real world cases that help the reader better grasp the concepts and ideas presented. The scheme of the book is also sequential, giving the reader a feel of continuity. This is done by introducing a company in the beginning and is taken through various stages in its evolution and through the market cycle. The author takes great pains to not let the flow ebb throughout the book. Recommended.

[Penn]

Well written and informative. Just too much to take in, for me, with zero background on the subject. Read the first four chapters and stopped. Just reading would not be enough for me; I would have to go more slowly to digest all that information, and somehow use and work with the information to hold on to it. Not motivated enough...

[Heather]

I'm reading this for work. It's not a thrilling read by any means, but it is a really good overview of stock market terminology. If you need to learn what things like Book Value or EBITDA mean, this book is a good foundation.

[Neeraj Sharma · Rating 4 out of 5]

this is the finest book I have ever read, it clears the concept of Mr. Market when it give opportunities to buy and sell. The seamless flow by William is infatuating and kindle the fire to read more.
One can get summary of the book easily and can read it, hence recommended!

[Booky · Rating 4 out of 5]

A good book for the novice in bringing together the various concepts of investing into a cohesive story.