THOMAS P. AU is a Vice President and Portfolio Manager for the investment arm of a large insurance and healthcare provider. His specialty is emerging and international markets. He has also worked for Unifund, an emerging markets firm in Geneva, Switzerland. Previously, he was an analyst for Value Line, an investment information company in New York City, serving in various capacities from 1983 to 1994. Mr. Au has received his BA, cum laude, with a double major in economics and history, from Yale University, and an MBA in finance from New York University.

PREFACE xi

PART I Basic Concepts 1

CHAPTER 1 Introduction 3

CHAPTER 2 Investment Evaluations and Strategies 16

PART II Fixed-Income Evaluation 29

CHAPTER 3 Foundation of Fixed Income 31

CHAPTER 4 Fixed-Income Issues of Corporations 47

CHAPTER 5 Distressed Fixed Income 63

PART III Equity Evaluation 79

CHAPTER 6 Cash Flows and Capital Expenditures 81

CHAPTER 7 Analysis of Asset Value 96

CHAPTER 8 Some Observations on the Value of Dividends 112

CHAPTER 9 Some Warnings about the Use of Earnings in Valuation 127

CHAPTER 10 Sales Analysis 143

PART IV Special Vehicles for Investment 157

CHAPTER 11 A Graham and Dodd Approach to Mutual Funds 159

CHAPTER 12 A Graham and Dodd Approach to International Investing 174

CHAPTER 13 A Graham and Dodd View of Real Estate 187

PART V Portfolio Management 203

CHAPTER 14 The Question of Asset Allocation 205

CHAPTER 15 The Concepts of Graham and Dodd versus Modern Theories and Practices 220

CHAPTER 16 Case Studies in Graham and Dodd Investing 234

CHAPTER 17 A Real-Time Experiment 257

PART VI Some Contemporary Issues 271

CHAPTER 18 A Historical View of the Dow and the "Market" 273

CHAPTER 19 Some Disquieting Thoughts on Excessive Credit Creation 292

CHAPTER 20 Generational Cycles in the American Stock Market 306

ENDNOTES 321

BIBLIOGRAPHY 327

INDEX 329