As with his weekly column, James Montier's Value Investing is a must read for all students of the financial markets. In short order, Montier shreds the 'efficient market hypothesis', elucidates the pertinence of behavioral finance, and explains the crucial difference between investment process and investment outcomes. Montier makes his arguments with clear insight and spirited good humor, and then backs them up with cold hard facts. Buy this book for yourself, and for anyone you know who cares about their capital!
—Seth Klarman, President, The Baupost Group LLC
The 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.
In this important new book, the highly respected and controversial value investor and behavioural analyst, James Montier explains how value investing is the only tried and tested method of delivering sustainable long-term returns.
James shows you why everything you learnt at business school is wrong; how to think properly about valuation and risk; how to avoid the dangers of growth investing; how to be a contrarian; how to short stocks; how to avoid value traps; how to hedge ignorance using cheap insurance. Crucially he also gives real time examples of the principles outlined in the context of the 2008/09 financial crisis.
In this book James shares his tried and tested techniques and provides the latest and most cutting edge tools you will need to deploy the value approach successfully.
It provides you with the tools to start thinking in a different fashion about the way in which you invest, introducing the ways of over-riding the emotional distractions that will bedevil the pursuit of a value approach and ultimately think and act differently from the herd.
Table of Contents
I. Why Everything You Learned in Business School is Wrong
- 1. Six Impossible Things before Breakfast, or, How EMH has Damaged our Industry
- 2. CAPM is Crap
- 3. Pseudoscience and Finance: The Tyranny of Numbers and the Fallacy of Safety
- 4. The Dangers of Diversification and Evils of the Relative Performance Derby
- 5. The Dangers of DCF
- 6. Is Value Really Riskier than Growth? Dream On
- 7. Deflation, Depressions and Value
II. The Behavioural Foundations of Value Investing
- 8. Learn to Love Your Dogs, or, Overpaying for the Hope of Growth (Again!)
- 9. Placebos, Booze and Glamour Stocks
- 10. Tears before Bedtime
- 11. Clear and Present Danger: The Trinity of Risk
- 12. Maximum Pessimism, Profit Warnings and the Heat of the Moment
- 13. The Psychology of Bear Markets
- 14. The Behavioural Stumbling Blocks to Value Investing
III. The Philosophy of Value Investing
15. The Tao of Investing: The Ten Tenets of My Investment Creed
- 15.1. THE AIM OF INVESTING
- 15.2. TENET I: VALUE, VALUE, VALUE
- 15.3. TENET II: BE CONTRARIAN
- 15.4. TENET III: BE PATIENT
- 15.5. TENET IV: BE UNCONSTRAINED
- 15.6. TENET V: DON'T FORECAST
- 15.7. TENET VI: CYCLES MATTER
- 15.8. TENET VII: HISTORY MATTERS
- 15.9. TENET VIII: BE SCEPTICAL
- 15.10. TENET IX: BE TOP-DOWN AND BOTTOM-UP
- 15.11. TENET X: TREAT YOUR CLIENTS LIKE YOU WOULD YOURSELF
- 15.12. CONCLUSION
- 16. Process not Outcomes: Gambling, Sport and Investment!
- 17. Beware of Action Man
- 18. The Bullish Bias and the Need for Scepticism. Or, Am I Clinically Depressed?
- 19. Keep it Simple, Stupid
- 20. Confused Contrarians and Dark Days for Deep Value
- 15. The Tao of Investing: The Ten Tenets of My Investment Creed
IV. The Empirical Evidence
- 21. Going Global: Value Investing without Boundaries
- 22. Graham's Net-Nets: Outdated or Outstanding?
V. The 'Dark Side' of Value Investing: Short Selling
- 23. Grimm's Fairy Tales of Investing
- 24. Joining the Dark Side: Pirates, Spies and Short Sellers
- 25. Cooking the Books, or, More Sailing Under the Black Flag
26. Bad Business: Thoughts on Fundamental Shorting and Value Traps
- 26.1. A TAXONOMY OF SHORTS
- 26.2. BAD MANAGERS
- 26.3. BEHAVIOURAL FOUNDATIONS OF BAD MANAGEMENT
- 26.4. BAD COMPANIES
- 26.5. BAD STRATEGIES
VI. Real-Time Value Investing
- 27. Overpaying for the Hope of Growth: The Case Against Emerging Markets
- 28. Financials: Opportunity or Value Trap?
- 29. Bonds: Speculation not Investment
- 30. Asset Fire Sales, Depression and Dividends
- 31. Cyclicals, Value Traps, Margins of Safety and Earnings Power
- 32. The Road to Revulsion and the Creation of Value
- 33. Revulsion and Valuation
- 34. Buy When it's Cheap – If Not Then, When?
35. Roadmap to Inflation and Sources of Cheap Insurance
- 35.1. FISHER AND THE DEBT-DEFLATION THEORY OF DEPRESSIONS
35.2. ROMER'S LESSONS FROM THE GREAT DEPRESSION
- 35.2.1. Lesson 1: Small Fiscal Expansion has Only Small Effects
- 35.2.2. Lesson 2: Monetary Expansion can Help to Heal an Economy Even When Interest Rates are Near Zero
- 35.2.3. Lesson 3: Beware of Cutting Back on Stimulus too Soon
- 35.2.4. Lesson 4: Financial Recovery and Real Recovery Go Hand in Hand
- 35.2.5. Lesson 5: Worldwide Expansionary Policy Shares the Burdens
- 35.2.6. Lesson 6: The Great Depression did Eventually End
- 35.3. BERNANKE AND THE POLICY OPTIONS
- 35.4. INVESTMENT IMPLICATIONS: CHEAP INSURANCE
- 36. Value Investors versus Hard-Core Bears: The Valuation Debate
- Title: Value Investing: Tools and Techniques for Intelligent Investment
- Release date: December 2009
- Publisher(s): Wiley
- ISBN: 9780470683590