Stephen Penman is a professor of accounting and security analysis at Columbia Business School and Bocconi. He has also written the book Accounting for Value, which illustrates how accounting numbers relate to value creation. In our conversation with Penman, we discuss the necessary separation between speculation and valuation, the ideal structure of an equity research report, and how aspiring investors can improve their processes.

For more info about the podcast, go to the episode page and make sure to follow us on Twitter/X. We love to hear your thoughts so please give us a rating/review in your podcast player! Also, feel free to share great authors, books, and investors you want to hear on the show. /Eddie & Niklas with team

This episode was recorded on Oct 30, 2023.

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Episode Chapters

(00:00) Intro by Eddie & Martin

(01:38) Welcoming Stephen

(04:17) Accounting for Value

(09:26) Fair value, mark to market, and historical cost accounting

(12:41) Separating speculation and valuation

(19:03) Using valuation to challenge the market’s assumptions

(20:20) Residual income

(26:38) How to improve as an aspiring investor

(30:28) Informational vs analytical edge

(32:26) Accounting arbitrage in today’s market

(37:39) Passive investing

(41:01) How does Stephen invest his own money?

(44:54) Allocating time between research and investing

(49:51) Should accounting professionals push changes to standards?

(53:52) The ideal structure of an equity research report

(58:56) Stephen on Buffett

(01:04:21) Stephen’s new book

(01:06:27) A book Stephen would like to read but not write

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Books Mentioned

• Accounting for Value - Stephen Penman
• Accounting for Value: Fundamental analysis for the active investor - Stephen Penman
• Expectations Investing - Michael Mauboussin

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More on Stephen

Profile on Columbia Business School

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About the Podcast

Intro episode: https://www.redeye.se/podcast/investing-by-the-books/817383/0-intro-to-investing-by-the-books

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What is Investing by the Books?

Investing by the Books was founded by Henrik Andersson, Bo Börtemark, Mats Larsson and Michael Persson. It has published hundreds of book reviews in the past 10 years and operates on a non-profit basis.

Visit the website: http://www.investingbythebooks.com/

Follow on Twitter/X: https://twitter.com/Investbythebook

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What is Redeye?

Redeye is a research-centered boutique investment bank from Stockholm. Founded in 1999, Redeye cultivates investors through timeless knowledge, a humble attitude, and a strong focus on quality.

Visit the website: https://www.redeye.se/

Follow on Twitter: https://twitter.com/Redeye_

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Disclaimer

Notice that the content in this podcast is not, and shall not be construed as investment advice. This information is meant to be informative and for general purposes only. For full disclaimer, visit Redeye.se