Value Investing Tools and Techniques for Intelligent Investment

Author: James Montier
Publisher: John Wiley & Sons
ISBN: 9780470683590
Published In: December 2009
Format: Hardback , 414 pages
Jurisdiction: International ? Disclaimer:
Countri(es) stated herein are used as reference only

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"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.

Preface.

Foreword.

PART 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.

PART 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.

PART III: THE PHILOSOPHY OF VALUE INVESTING.

15. The Tao of Investing: The Ten Tenets of My Investment Creed.

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.

PART IV: THE EMPIRICAL EVIDENCE.

21. Going Global: Value Investing without Boundaries.

22. Graham’s Net-Nets: Outdated or Outstanding?

PART 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.

PART 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.

36. Value Investors versus Hard Core Bears: The Valuation Debate.

References.

Index.

James Montier is a member of GMO's asset allocation team. Prior to that he was global strategist for Société Générale and Dresdner Kleinwort. He has been the top rated strategist in the annual extel survey for most of the last decade. He is also the author of three other books – Behavioural Finance (2000, Wiley), Behavioural Investing (2007, Wiley) and The Little Book of Behavioral Investing (Forthcoming, Wiley). James is a regular speaker at both academic and practitioner conferences, and is regarded as the leading authority on applying behavioural finance to investment. He is a visiting fellow at the University of Durham and a fellow of the Royal Society of Arts. He has been described as a maverick, an iconoclast, an enfant terrible by the press.