Table Of ContentTable of Contents
Title Page
Copyright Page
Dedication
Preface
Part I: Why everything you learned in business school is wrong
Part II: The behavioural foundations of value investing
Part III: The philosophy of value investing
Part IV: The empirical evidence
Part V: The ‘Dark Side’ of value investing: Short selling
Part VI: Real-time value investing
Foreword
Part I - Why Everything You Learned in Business School is Wrong
Chapter 1 - Six Impossible Things before Breakfast, or, How EMH has Damaged
our Industry
THE DEAD PARROT OF FINANCE
THE QUEEN OF HEARTS AND IMPOSSIBLE BELIEFS
SLAVES OF SOME DEFUNCT ECONOMIST
PRIMA FACIE CASE AGAINST EMH: FOREVER BLOWING
BUBBLES
THE EMH ‘NUCLEAR BOMB’
Chapter 2 - CAPM is Crap
A BRIEF HISTORY OF TIME
CAPM IN PRACTICE
WHY DOES CAPM FAIL?
CAPM TODAY AND IMPLICATIONS
Chapter 3 - Pseudoscience and Finance: The Tyranny of Numbers and the
Fallacy ...
BLINDED BY PSEUDOSCIENCE
WATCHING TV IMPROVES YOUR MATHS ABILITY
SEDUCTIVE DETAILS
APPLICATIONS TO FINANCE
CONCLUSIONS
Chapter 4 - The Dangers of Diversification and Evils of the Relative ...
ON THE DANGERS OF ‘NARROW’ DIVERSIFICATION
EQUITY PORTFOLIOS: THE OTHER EXTREME
RELATIVE PERFORMANCE DERBY AS A SOURCE OF POOR
PERFORMANCE!
A (VERY SHORT) PRACTICAL GUIDE TO DIVERSIFICATION
Chapter 5 - The Dangers of DCF
INTERACTION PROBLEMS
ALTERNATIVES
Chapter 6 - Is Value Really Riskier than Growth? Dream On
RISK I: STANDARD DEVIATION
RISK II: CAPM BETA AND CO.
RISK III: BUSINESS CYCLE RISK
Chapter 7 - Deflation, Depressions and Value
VALUE AND JAPAN
VALUE AND THE GREAT DEPRESSION
WHY THE DIFFERENCE BETWEEN THE GREAT DEPRESSION AND
JAPAN?
Part II - The Behavioural Foundations of Value Investing
Chapter 8 - Learn to Love Your Dogs, or, Overpaying for the Hope of Growth
(Again!)
OF DOGS AND STARS
ANALYST EXPECTATIONS AND IMPLIED GROWTH
BRINGING IN VALUATION
A CASE IN POINT: MINING
Chapter 9 - Placebos, Booze and Glamour Stocks
PAINKILLERS, PLACEBOS AND PRICE
DOES EXPENSIVE WINE TASTE BETTER?
GLAMOUR STOCKS
BEATING THE BIAS
Chapter 10 - Tears before Bedtime
BUILT TO LAST
ADMIRED OR DESPISED?
DON’T BE AN UGLY DEFENDANT
ANALYSTS’ VIEWS ON GROWTH
CONCLUSIONS
Chapter 11 - Clear and Present Danger: The Trinity of Risk
VALUATION RISK
BUSINESS/EARNINGS RISK
BALANCE SHEET/FINANCIAL RISK
PUTTING IT ALL TOGETHER
Chapter 12 - Maximum Pessimism, Profit Warnings and the Heat of the Moment
EMPATHY GAPS
PREVENTING EMPATHY GAPS AND THE PERILS OF
PROCRASTINATION
MAXIMUM PESSIMISM TRADES
PROFIT WARNINGS
LOCK-INS
CONCLUSIONS
Chapter 13 - The Psychology of Bear Markets
FEAR AND BEAR MARKETS
AS TIME GOES PAST
THE IMPACT OF BRAIN DRAIN
THE BLANK SLATE
Chapter 14 - The Behavioural Stumbling Blocks to Value Investing
KNOWLEDGE ≠ BEHAVIOUR
LOSS AVERSION
DELAYED GRATIFICATION AND HARD-WIRING FOR THE SHORT
TERM
SOCIAL PAIN AND THE HERDING HABIT
POOR STORIES
OVERCONFIDENCE
FUN
NO, HONESTLY I WILL BE GOOD
Part III - The Philosophy of Value Investing
Chapter 15 - The Tao of Investing: The Ten Tenets of My Investment Creed
THE AIM OF INVESTING
TENET I: VALUE, VALUE, VALUE
TENET II: BE CONTRARIAN
TENET III: BE PATIENT
TENET IV: BE UNCONSTRAINED
TENET V: DON’T FORECAST
TENET VI: CYCLES MATTER
TENET VII: HISTORY MATTERS
TENET VIII: BE SCEPTICAL
TENET IX: BE TOP-DOWN AND BOTTOM-UP
TENET X: TREAT YOUR CLIENTS LIKE YOU WOULD YOURSELF
CONCLUSION
Chapter 16 - Process not Outcomes: Gambling, Sport and Investment!
THE PSYCHOLOGY OF PROCESS
CONCLUSIONS
Chapter 17 - Beware of Action Man
GOALKEEPERS AS ACTION MEN
INVESTORS AND ACTION BIAS
BUFFETT ON THE FAT PITCH
BIAS TO ACTION PARTICULARLY PRONOUNCED AFTER POOR
PERFORMANCE
CONCLUSIONS
Chapter 18 - The Bullish Bias and the Need for Scepticism. Or, Am I Clinically
Depressed?
THE BULLISH BIAS IN FINANCE
THE SOURCES OF BULL
SCEPTICISM AS A DEFENCE
A RATIONALE FOR EVIDENCE-BASED INVESTING
DEPRESSIVE REALISM
Chapter 19 - Keep it Simple, Stupid
IS MORE BETTER?
KISS: KEEP IT SIMPLE, STUPID
LESSONS FROM HEART ATTACKS
WHY?
CAN ANYTHING BE DONE?
SIMPLICITY IS KEY
EXPERTS FOCUS ON THE KEY INFORMATION
FROM THE EMERGENCY ROOM TO THE MARKETS
Chapter 20 - Confused Contrarians and Dark Days for Deep Value
DARK DAYS FOR DEEP VALUE
DEEP VALUE WORKS OVER THE LONG TERM
VALUE OUT OF VOGUE
SHORT-TERM UNDERPERFORMANCE IS A BY-PRODUCT OF A
SENSIBLE INVESTMENT PROCESS
IS THERE LIGHT AT THE END OF THE TUNNEL FOR VALUE?
Part IV - The Empirical Evidence
Chapter 21 - Going Global: Value Investing without Boundaries
THE EUROPEAN EVIDENCE
DEVELOPED MARKETS EVIDENCE
BRINGING IN THE EMERGING MARKETS
PATIENCE IS STILL A VIRTUE
CONCENTRATED PORTFOLIO
CURRENT PORTFOLIO STANCES
CONCLUSIONS
Chapter 22 - Graham’s Net-Nets: Outdated or Outstanding?
GOING GLOBAL
THE CURRENT NET-NETS
PERMANENT LOSS OF CAPITAL
CONCLUSION
Part V - The ‘Dark Side’ of Value Investing: Short Selling
Chapter 23 - Grimm’s Fairy Tales of Investing
Chapter 24 - Joining the Dark Side: Pirates, Spies and Short Sellers
VALUATION
FINANCIAL ANALYSIS
CAPITAL DISCIPLINE
PUTTING IT ALL TOGETHER
Chapter 25 - Cooking the Books, or, More Sailing Under the Black Flag
COMPANIES LIE, SHORT SELLERS POLICE: THE EVIDENCE
WHO IS COOKING THE BOOKS? THE C-SCORE
DOES THE C-SCORE WORK?
Chapter 26 - Bad Business: Thoughts on Fundamental Shorting and Value Traps
A TAXONOMY OF SHORTS
BAD MANAGERS
BEHAVIOURAL FOUNDATIONS OF BAD MANAGEMENT
BAD COMPANIES
BAD STRATEGIES
Part VI - Real-Time Value Investing
Chapter 27 - Overpaying for the Hope of Growth: The Case Against Emerging
Markets
THE SORRY TALE OF SIR ROGER
EMERGING MARKETS AS THE SIR ROGER OF INVESTMENT
CONCLUSIONS
Chapter 28 - Financials: Opportunity or Value Trap?
