Table Of Content

Table 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?