The Art of Value Investing: How the Worlds Best Investors Beat the Market (Wiley Finance)

This book is literally encyclopedia of value investing tips and best practices You are spoiled by the choice. Perosnally I learnt many new best practices and methods after reading this book. This learning is going to help me for life time I reckon. Cons- After reading this book your head will spin. The book is organised as series of tips form scores of investors and this is done for every facet of investment It goes on and on.

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You will find one investor saying he does not care for management quality imemdiately after some one had said he does not invest unless management is good. Same goes for small cap Vs large cap, Cigar Butt Vs Good quality business at reasonable price, Macro outlook Vs company specific outlook.

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The novice investors may get paralized after reading these contradictory reccomendations. But this is great asset for experienced investors who are looking for variety of perspectives and who can pick and choose what they find suitable. I am greateful to author for making this all wisdom available to me in one book. All in all I would strongly reccomend this book to all fundamental investors.

I can assure it will be good value for your money. You will find at least one bit of wisdom that you were not aware of and something which you can use that very day.

In fact I would go further and claim May become bit of a classic I guess. Dec 22, Michael Cestas rated it liked it. The book is a compilation of insights from 'great' investors, categorized by topic. It is useful for thinking through a specific topic or finding a quote on one from someone with more authority. One thing I like is that the book intentionally includes quotes in each section that conflict. This makes it more balanced, and gives the reader the opportunity to think through each side before taking his or her own position. Here are some quotes that I liked note I couldn't include them all due to the The book is a compilation of insights from 'great' investors, categorized by topic.

Here are some quotes that I liked note I couldn't include them all due to the character limit. Email me for the full file: What it needs is, first, reasonable good intelligence; second, sound principles of operation; third, and most important, firmness of character. Value to me often derives from competitively strong companies in structurally attractive industries supported by secular growth. So regardless of how cheap something is or how much potential upside there is, that means avoiding companies that can wipe out—with too much debt, unproven business models, secularly challenged end markets or no durable competitive advantages.

That's not at all to say valuation doesn't matter, but there have been many times when I've been right about the trend but didn't buy a leader because it was 20 percent too expensive and that turned out to be a mistake. The keys to our investing approach are the symmetrical opposite of that: On the humility side, one of the things that Jean-Marie Eveillard firmly ingrained in the culture here is that the future is uncertain. That results in investing with not only a price margin of safety, but in companies with conservative balance sheets and prudent and proven management teams.

If you acknowledge your crystal ball is at best foggy, you follow the advice of Ben Graham and invest to avoid the landmines. In terms of flexibility, we've been willing to be out of the biggest sectors of the market, whether it was Japan in the late s, technology in the late s or financials the late s. That wasn't necessarily because of any particular gift of foresight, but reflected a recognition that each of those areas embodied very widely accepted and high expectations.

It's painful and not socially acceptable to be out of the most revered sectors of the market, but those types of acts of omission have been a key contributor to the strong performance. The third thing in terms of temperament we think we value more than most other investors is patience. We have a five-year average holding period. Particularly in a volatile market like today's, people are trying to zig and zag ahead of every market turn that they're hoping they can forecast with scientific precision.

We like to plant seeds and then watch the trees grow, and our portfolio is often kind of a portrait of inactivity. That's kept us from making sharp and sometimes emotional moves that we eventually come to regret. If they don't and somebody else does, you can buy low all you want, but you find out pretty quickly that you were buying a future income stream that was a mirage. We haven't sworn off technology entirely, but we've essentially sworn off investing in shortproduct- cycle technology. We look for technology companies where the business cycles are glacial in comparison.

Low-quality businesses, which don't have much control over their futures, exhibit the opposite characteristics. We generally consider cyclical, commodity businesses to fit this more negative profile and so are less invested there. We favor companies with transparent businesses that we can understand fairly quickly and those that have large and recurring maintenance, repair, and overhaul revenues from an installed base, such as elevator companies or aerospace-parts firms.

I don't do retail because you have to recreate the demand every day. I don't do financial services because it's a spread business with no real free cash in it—you have to grow equity to grow assets to make more spread. I don't do much in industrials because the capital demands are high and, long term, the cost structure—particularly with labor and energy prices—is challenging in a global economy. I don't do commodities—we like price-makers that set prices based on value added, as opposed to price takers. If you buy a high-quality business, you only have to be right once—buying at the right price.

The sale is fairly easy to execute. In cyclical or commodity areas, you have to be right twice, on the buy and the sell. If you miss the exit, it might be awhile before it comes back around. That can be financial leverage, which is reflected on the balance sheet. It can be operational leverage, where you look at how much of the cost base is fixed or variable.

It can also be the degree of leverage to a particular industry or geography. In general, I'm uncomfortable with companies that are vulnerable to more than one of those kinds of leverage going against them at the same time. A cyclical business that has a lot of fixed costs, for example, should not have a lot of financial leverage or be too levered to one geography or industry. If things go the wrong way, management has its hands tied in trying to get out of trouble. This is a big reason we rarely find opportunity in more commodity-type businesses. That's a natural evolution in any large, developing economy and we expect that dynamic to create considerable value in places like India for a long time.

But the big-money ideas are those where the changes are far beyond what you can conceive today. The closer you can get to conceiving those types of changes and the higher the probability they might happen, the more likely you are to find big winners. That's largely a numbers-driven exercise, focusing on returns on equity, margins, and growth in key sales and profitability metrics—all in comparison with the competition.

The Art of Value Investing: How the World's Best Investors Beat the Market

We've identified more than companies—primarily in the U. Ideas come out of that all the time. Another thing I've done in my personal account is to buy one share of probably micro-cap companies, which is kind of my own customized research service. The daily mail delivery is kind of a Christmas grab bag—you never know when an annual or quarterly that arrives is going to catch your eye.

We follow in a disciplined way things like spinoffs, rights offerings, new equity issuance and buybacks. Controlling your process is absolutely crucial to long-term investment success in any market environment. I grew up in the business with the basic assumption that I didn't need to worry much about macro issues as long as I had enough margin of safety from a cheap stock price. That's no longer a safe assumption, so we force ourselves to more fully assess the risks of Political, Economic, Social and Technological changes that could derail our thesis. Using a nautical analogy, we're looking at the weather forecast to make sure our boat will be strong enough, not to pick the day to go sailing.

Even our macro views stem largely from bottom-up work. We were interested in Fannie Mae in but first wanted to understand their credit risk better. We spoke with the ratings agencies and asked them what would happen if house prices fell. We just move on to where the micro is driving value. Historically, little volume transacts at the bottom or on the way back up and competition from other buyers will be much greater when the markets settle down and the economy begins to recover.

Moreover, the price recovery from a bottom can be very swift. Therefore, an investor should put money to work amidst the throes of a bear market, appreciating that things will likely get worse before they get better. It's frankly an advantage to not get overly distracted by macroeconomic concerns, which can make it hard to pull the trigger on a great business when the opportunity presents itself.

As a result, features of businesses we're tempted by typically include stable market shares, stable margins, pricing power and long data series, so we can evaluate how the business has performed through good times and bad. We like concentrated industries with two or three primary players. As value investors, we are typically buying the underperformer.

There are issues to fix, but the customers are rooting for you and the leading competitor, with high margins and a high stock price, is probably not going to go for the jugular.

What are the key drivers of the business and how are they changing? What is the company doing to position itself for that future, and what is it doing to operate more efficiently and effectively?

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How are they redeploying capital? Our view is that if you can get 85 percent of the way there by answering the big questions, don't waste your time on the last 15 percent because the marginal utility isn't worth it. You have to focus first and foremost on high-quality businesses that can't blow up and should grow in value over time. At a basic level, the product or service being sold is critical to customers but is only a small part of their cost structure, and the customer relationship tends to be sticky and recurring. Generally, we end up in intellectual-property-based businesses that can price off of a value-add rather than some sort of cost basis.

We want the financial and business models to be transparent. In terms of competitive dynamics, we want to understand the value of the company's product or service to customers and the strength of its competitive moat. From an industry perspective, we ideally want to see long-term sustainable growth and secular tailwinds. One [of my more common mistakes] would be ignoring the potential impact of leverage.

In the grand scheme of things, being 10 percent off isn't that big a mistake, but when there's heavy leverage, it is.

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Common examples would be things like the loss of a giant customer, or market incursions from a powerful competitor. Given the outsized positions we take, we want in a disciplined way to contemplate those scenarios up front and pass on the investment if they're even somewhat likely. Making judgments about management is important to us and something I think value managers tend to underweight.

You can analyze something statistically, but if you expect to own it for 10 years, management is going to make thousands of decisions you can't predict and may never even know about, which collectively make earnings compound at a rate more or less than they would have otherwise. Those things can add up over time to the difference between a great performer and an also-ran.

I don't care how smart an analyst you are, you can't really know what's going on inside a business. We want to invest not only in highly capable managers, but also those with clear track records of integrity and acting in shareholders' best interest. I've learned over time that great management teams deliver positive surprises and bad ones deliver negative surprises. I'm not interested, for example, in CEOs who appear personally greedy.

I frequently ask CEOs how they measure success. They often speak about meeting the needs of their various constituencies, including shareholders, employees, customers, and the community. Many have said they measure their success by the rise in the share price. The closer they get to saying they measure success by growth in the company's real economic value per share, the more interested I am. You can usually pick out the empire builders with that question alone—they tend to have a hard time zeroing in on a concrete answer.

The best managers can usually say clearly and with confidence where they see the highest return-on-invested-capital opportunities and what they expect those returns to be. They also are typically smart about buying back their shares—not just on some systematic basis, but opportunistically when they believe the shares are cheap.

Part of being a wise person is resisting the other person's expository—to know nonsense when you see it. If you're like me, you can conceal your contempt for the person even as they speak. Aug 21, InvestingByTheBooks. When I opened up this book my initial reaction was disappointment. It almost exclusively consists of a collection of quotations from the monthly magazine Value Investors Insight. Tilson is also as most would know, a well- know When I opened up this book my initial reaction was disappointment.

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Tilson is also as most would know, a well- known value investor in his own right. The concept is simple; line up the questions that should be answered in order to create a well thought out investment philosophy and an effective investment process. Then let a number of investors give their answers. This means that each question gets several and often contradictory answers. However, the reader gets to survey a ton of the hard won insights various seasoned investors have made over their careers.

Who should read The Art of Value Investing? It is as vital a resource for the just starting out investor as for the sophisticated professional one. The former will find a comprehensive guidebook for defining a sound investment strategy from A-to-Z; the latter will find all aspects of his or her existing practice challenged or reconfirmed by the provocative thinking of their most-successful peers. It also is a must read for any investor institutional or individual charged with choosing the best managers for the money they are allocating to equities.

Choosing the right managers requires knowing all the right questions to ask as well as the answers worthy of respect and attention both of which are delivered in The Art of Value Investing. The co-Editor of Value Investor Insight and co-founder of the Value Investing Congress details his proven investment approach The Art of Value Investing takes the lifelong process of learning how to identify profitable investment opportunities and streamlines these lessons into strategies that will help you build a successful investment portfolio.

Authors John Heins and Whitney Tilson divide each of the general money-making opportunities he has identified into separate chapters, made more practical and relevant by the use of detailed, real-life case studies. They then describe how to avoid investment pitfalls-or alternatively stated, where to look for short opportunities-which are again brought to life by specific examples. The final section offers an overview of the psychological and behavioral biases that hinder sound investment decision-making and how to overcome them to ensure continued financial success.

Filled with key insights and successful strategies for Buffett-like market beating returns Written by one of the leading authorities on value investing Maps out the essentials of value investing with real life examples In todays shaky financial climate, value investing remains a reliable discipline. The Art of Value Investing puts this approach in perspective and shows you how it can be used to improve your investment performance. Additional Details Series Volume Number. John Heins and Whitney Tilson, co-founders of the Value Investor Insight newsletter, have done a thorough job of explaining how to look for stocks that are trading at significant discounts to what they are worth?

The New York Times?

The Art of Value Investing: How the World's Best Investors Beat the Market by John Heins

This book provides a valuable contribution to the industry literature on value investing. It is well written, well organized, and quite enjoyable. The Art of Value Investing should be read by all investors who are seriously interested in enhancing their understanding of this important field.? CFA Institute Book Review John Heins and Whitney Tilson, co-founders of the ValueInvestor Insight newsletter, have done a thorough job of explaininghow to look for stocks that are trading at significant discounts towhat they are worth the concept known as the value style ofinvesting.

The New York Times [ The Art of Value Investing ] is packed withinvaluable insights and is relevant to both the novice and theexperienced investor. This book provides a valuablecontribution to the industry literature on value investing. It iswell written, well organized, and quite enjoyable.