Chapter 6The Long Strategy That Works for Our Long-Short Portfolio


What is the best long strategy to pair with short exposure? Telling you that is my job (Tom here) in this book, which advocates a long-short portfolio combining John’s and my ideas. The answer is to use the strategy with more data in support than any other: “small cap value.”

Whether it goes by the name of “deep value,” “opportunistic value,” or “banana value,” all value investors, including me, select stocks with one or more of the following five important attributes: low price-to-asset value, low price-to-earnings, a pattern of insider buying, a stock price that has declined, and small market capitalization. These are the five common attributes in Tweedy Browne’s landmark ...

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