Description
Book SynopsisThe seductive elegance of classical finance theory is powerful, yet value investing requires that we reject both the precepts of modern portfolio theory (MPT) and pretty much all of its tools and techniques. This book explains how value investing is the only tried and tested method of delivering sustainable long-term returns.
Trade Review'Any disciple of value investing will benefit greatly from reading this book.' (UK Analyst.com, May 2011).
Table of ContentsPreface xi
Foreword xvii
Part I Why Everything You Learned in Business School Is Wrong 1
1 Six Impossible Things before Breakfast, or, How EMH has Damaged our Industry 3
2 CAPM is Crap 19
3 Pseudoscience and Finance: The Tyranny of Numbers and the Fallacy of Safety 29
4 The Dangers of Diversification and Evils of the Relative Performance Derby 39
5 The Dangers of DCF 47
6 Is Value Really Riskier than Growth? Dream On 57
7 Deflation, Depressions and Value 65
Part II The Behavioural Foundations of Value Investing 73
8 Learn to Love Your Dogs, or, Overpaying for the Hope of Growth (Again!) 75
9 Placebos, Booze and Glamour Stocks 85
10 Tears before Bedtime 93
11 Clear and Present Danger: The Trinity of Risk 105
12 Maximum Pessimism, Profit Warnings and the Heat of the Moment 113
13 The Psychology of Bear Markets 121
14 The Behavioural Stumbling Blocks to Value Investing 129
Part III The Philosophy of Value Investing 141
15 The Tao of Investing: The Ten Tenets of My Investment Creed 143
16 Process not Outcomes: Gambling, Sport and Investment! 165
17 Beware of Action Man 173
18 The Bullish Bias and the Need for Scepticism. Or, Am I Clinically Depressed? 181
19 Keep it Simple, Stupid 195
20 Confused Contrarians and Dark Days for Deep Value 205
Part IV The Empirical Evidence 215
21 Going Global: Value Investing without Boundaries 217
22 Graham’s Net-Nets: Outdated or Outstanding? 229
Part V The ‘dark Side’ of Value Investing: Short Selling 237
23 Grimm’s Fairy Tales of Investing 239
24 Joining the Dark Side: Pirates, Spies and Short Sellers 247
25 Cooking the Books, or, More Sailing Under the Black Flag 259
26 Bad Business: Thoughts on Fundamental Shorting and Value Traps 265
Part VI Real-time Value Investing 279
27 Overpaying for the Hope of Growth: The Case Against Emerging Markets 281
28 Financials: Opportunity or Value Trap? 291
29 Bonds: Speculation not Investment 299
30 Asset Fire Sales, Depression and Dividends 309
31 Cyclicals, Value Traps, Margins of Safety and Earnings Power 315
32 The Road to Revulsion and the Creation of Value 325
33 Revulsion and Valuation 343
34 Buy When it’s Cheap – If Not Then, When? 355
35 Roadmap to Inflation and Sources of Cheap Insurance 361
36 Value Investors versus Hard-Core Bears: The Valuation Debate 371
References 379
Index 383
