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Article Archive: Value Investing

The superior returns of cyclical stocks
07/14/24   Value Investing
"So now you know what to buy. Cyclical stocks with low valuations. Then hold on to them for a long time. This is really the hard part because value investing is already psychologically demanding, but value investing in highly cyclical companies is a step up from that."

Mean reversion, or extreme aversion?
06/29/24   Value Investing
"In other words, it is the value stocks in Europe which have been hit the hardest. Harder than the growth stocks, and even harder than US value stocks. Much harder, in fact."

Francis Chou talks at Ivey
06/22/24   Value Investing
"Francis Chou talks about value investing and his private company at Ivey" [video]

Valuation multiples
05/09/24   Value Investing
"the multiples of P/E and EV/EBITDA provide a similar signal. But there can be cases where two companies have similar P/Es and dissimilar EV/EBITDA multiples, or dissimilar P/Es and similar EV/EBITDA multiples. These differences are generally attributable to differences in underlying profitability, capital structure, or tax rates." [pdf]

Quality, value, or both
05/09/24   Value Investing
"For investors unwilling to compromise on both value and quality, we believe small caps are likely to present the most compelling opportunities."

05/09/24   Value Investing
"The small cap dating scene remains unattractive, in our opinion. However, for many consumer discretionary companies with debt, equity prices have fallen sharply, and valuations have become more attractive. That said, these aren't dream dates! Cyclical companies with debt often come with a lot of baggage and potential drama. Before committing and getting too serious, we recommend stress testing the balance sheet and cash flow by including periods with high unemployment and tightening credit conditions. And if alcohol is needed to stomach the risk, we suggest patience and waiting for a better match."

Noisy factors
03/17/24   Value Investing
"A Nobel laureate's theory supports betting on cheaper stocks and sets a benchmark for money managers. But the numbers keep changing. How much does it matter?"

Japan's orphans
02/25/24   Value Investing
"Abandoned, deep-value micro-caps found sufficient buyers to produce a sizable premium over other strategies, even when the size premium only worked 50% of the time and liquidity levels and relative valuations for Japan were falling."

Valuing Japan's reform
02/03/24   Value Investing
"44% of Japanese companies trade at <1x P/B, but they're almost all microcaps"

Persistence of value and growth
12/23/23   Value Investing
"Growth is neither persistent nor predictable, as evidenced by the relatively high turnover among stocks in the most expensive quartile. Concurrently, the cheapest companies tend to see their multiples revert towards the mean gradually over time. Investors in the cheapest quartiles are compensated with significantly higher dividend yields and the most leverage to rising multiples as sentiment improves."

The Dispersion Delusion
12/15/23   Value Investing
"Our results suggest that the dispersion in private equity can be fully replicated in public markets, provided that investors focus on buying cheap, levered micro-caps and hold them in a concentrated portfolio, similar to the portfolio construction in PE."

The death of small cap
11/19/23   Value Investing
"small caps currently trade at a 40% discount relative to large caps in the US, so its plausible the decline in small cap quality is reflected in lower multiples. But this still leaves the question of why US small caps trade in line with Europe and at a premium to Japan despite lower GP/A."

Terminal valuation multiples
11/12/23   Value Investing
"In short, TEV multiples should revert toward 12.0x, and an analyst should assume that a company retains 60% of its premium or discount to that multiple."

International value
10/07/23   Value Investing
"While value stocks have provided higher returns than growth stocks, like all strategies that invest in risky assets, value investors experience long periods of underperformance. Such periods test investor discipline. Sadly, it is my experience that while economists know that when it comes to risk assets, returns over periods of 10 years or even longer are likely to be just 'noise,' most investors think that three years is a long time to judge performance, five years a very long time, and ten years an eternity. That belief leads them to sell after periods of underperformance. This is even though such periods generally result in asset trading at historically cheap levels."

What Works in Banking
09/24/23   Value Investing
"A strategy that buys cheap, high-quality banks with conservatively managed loan and asset books can be expected to deliver excess returns in the majority of market environments."

More bang for your buck
09/10/23   Value Investing
"Europe offers higher profitability among firms trading at deep discounts."

Seth Klarman on Security Analysis
08/13/23   Value Investing
"An avid coin collector as a kid, Klarman would read everything he could about his hobby. In 1965, the U.S. mint stopped using silver in dimes and quarters, and reduced the amount in half dollars, as the price of silver rose. In 1971, when Klarman was 14 and riding the New York City buses, he befriended the driver, who let him swap a current quarter for the more valuable pre-1965 pure silver coins in the bus's fare box. He was buying the proverbial dollar at a discount."

The Albert Bridge factory
07/23/23   Value Investing
"despite the many short-term headwinds most 'value' investors have experienced over the last few years, that is where we'll have long-term tailwinds."

Alternative value metrics
07/09/23   Value Investing
"The researchers showed that these alternative value metrics indirectly exposed the profitability premium and a sector allocation closer to the U.S. market. For example, the hypothetical P/B portfolio had an allocation to the financial sector of 27%, more than twice as much as the U.S. market. On the other hand, the hypothetical portfolio formed on P/CF had a weighting to financials of 16% compared with the market's 13% weighting."

Value and profitability are complementary
07/02/23   Value Investing
"While sharing a common trading philosophy, we believe the characteristic differences between value and quality mean that they are complementary in a portfolio because they work in different ways and at different times. Both strategies can offer a return premium to the market, with the equal-weight value portfolio outperforming the market by 3 percentage points per year since 1998 and the equal-weight quality portfolio outpacing the market by 2 percentage points per year over the same horizon"

Japan's value mandate
06/16/23   Value Investing
"If the reform catalyst plays out, a rising tide may lift all boats, and one might do quite well investing in Japanese large value. But it is curious to us that the stocks you would expect to be most in demand based on the catalyst criterion (and fundamentals) have seen prices rise the least so far this year as investors got excited about Japan."

Size doesn't matter
06/16/23   Value Investing
"The fact large-cap value and small-cap value stocks earn similar returns may be shocking for investors who have been sold the idea that value investors have to invest in small-caps to capture the value premium. But we need to remember that data/evidence should drive decisions, not stories."

Size and long-only value investing
06/16/23   Value Investing
"Equally weighted large-cap value portfolios have historically earned similar returns as small-cap value portfolios." [pdf]

Concentrating for factors
05/21/23   Value Investing
"How many stocks should you own in a concentrated factor portfolio if the goal is maximizing expected returns or Sharpe ratio?"

Swedish Fish
04/30/23   Value Investing
"Overall, we think that the low valuations in Europe relative to the US warrant a consideration of overweighting Europe in a global asset allocation today. And one doesn't have to enjoy eating fermented herring or ice swimming to be attracted to the historical discounts on offer in countries like Sweden."

Booms and busts in value
04/30/23   Value Investing
"Campbell, Giglio, and Polk also showed that while the classic value strategy bets on the convergence of valuation ratios across and within industries, the intra-industry component of such a bet typically contributes much more to value.s average outperformance. Thus, investors building value-oriented portfolios might want to consider funds that are industry neutral."

America's first value investor
03/25/23   Value Investing
"Hetty Green's accomplishments are extraordinary by any standard, but what makes them even more impressive is that she succeeded despite having none of the advantages afforded to men at the time. Hetty Green could not purchase a seat on the New York Stock Exchange, serve as a director on a corporate board, or even exercise the right to vote."

Value spread expands
03/19/23   Value Investing
"Today's peak seems more like the tech bubble than the financial crisis. Expensive stocks were bid up to unfathomably high prices, while deep value type stocks have just plodded along."

Intangibles and value
03/05/23   Value Investing
"It is worth noting that other value metrics, such as price-to-sales (which is not affected by accounting for intangibles), did not work during the 'dark winter' for value stocks. This shows that the poor performance of the value factor was less about how the worth of a stock was measured and more about the price aspect (growth stocks outperformed because the multiple of earnings investors were willing to pay for them increased dramatically relative to the multiple for value stocks)."

Information in valuation spreads
02/12/23   Value Investing
"For value investors, the above findings are good news. The largest historical drawdown for the value premium from November 2016 through October 2020 led to a dramatic widening of the book-to-market spread between value and growth stocks."

After the darkest hour
02/05/23   Value Investing
"Today, deep value companies in Europe can be purchased at around 5x EV/EBITDA and 0.8x Price/Book"

Tim talks value
01/29/23   Value Investing
Tim McElvaine talks about some of his recent investments. [video]

Valuation risk strikes
01/29/23   Value Investing
"We think there's ample room for continued normalization of multiples that should continue to support small-cap and value stock returns globally in the decade ahead."

The bubble has not popped
01/08/23   Value Investing
"Value spread at 94th percentile"

Vincent Daniel and Porter Collins interview
11/06/22   Value Investing
"Tobi interviews Vincent Daniel and Porter Collins from Seawolf on energy, inflation and the Fed." [video]

Order 66
11/06/22   Value Investing
"The central truth of the investment business is that investment behavior is driven by career risk. The prime directive ... is first and last to keep your job."

Fair multiples
10/28/22   Value Investing
"Mean reversion of the multiple is so powerful that the only factors other than starting TEV/EBITDA that matter are gross margin, free cash flow conversion and, to a small extent, size and return on capital (EBITDA/assets, this time with the sign in the direction we.d expect)."

Predicting growth
10/23/22   Value Investing
"The data in this chart is counterintuitive. Not because the high growth forecasts are too optimistic, but because they fade so quickly. We suspect that this historical base rate chart is far from what many investors hold in their head. But we also suspect that if we choose to replicate this data 20 years from now, the results will look eerily similar."

Rob Arnott interview
10/01/22   Value Investing
"Arnott shares his outlook on inflation, value stocks, and his cheap diversifiers strategy." [video]

Patience of value investors
09/25/22   Value Investing
"Over the eight-year period 2000-2007, the Fama-French U.S. Value Research Index returned 11.0 percent per annum, outperforming the Fama-French U.S. Growth Research Index return of just 0.4 percent per annum by 10.6 percentage points a year. As you saw in the chart on valuation spreads from AQR, today's valuation spreads are very similar to what they were at the last peak in the 'bubble' in growth stocks. While that isn't a guarantee that value stocks will outperform, and do so by significant margins, it's what the historical evidence suggests is likely."

Abandoning diversification
09/04/22   Value Investing
"Perhaps at the time when many investors are abandoning diversification in favor of putting all their money in the S&P 500, it's time to reconsider - and make the bet - that valuation gaps that have driven wide relative return differences might be strongly mean reverting."

The size factor
08/27/22   Value Investing
"over the full period since 1963, small-cap value has been by far the best-performing corner of the equity markets, according to Ken French's data. And this relationship has been consistent across geographies"

Emerging market cycles
08/19/22   Value Investing
"we see no compelling reasons for an evergreen allocation to EM. However, EM equities perform particularly well during recoveries, when currencies stabilize and earnings and multiples rise."

Value is not an interest rate bet
08/12/22   Value Investing
"It seems obvious to so many that interest rates drive the value trade. After all, growth stocks have much longer-dated cash flows than value stocks and thus should be a 'longer duration' asset and move more with longer-term interest rates, right? 'Growth (or often just 'tech') stocks soar on plunging interest rates' (or vice versa) has become a common wise-sounding observation in the last few years. In fact, this is all taken as an axiomatic given in countless pundit and press observations. However it's not nearly that simple, and mostly it's just not true."

Betting against expensive junk
08/12/22   Value Investing
"For the first six months of this year, long-only investors really couldn't win. Unless you started the year long oil, almost every major asset class produced losses."

Tom Russo interview
08/07/22   Value Investing
"Global value investor Tom Russo says today's investment environment is the most challenging of his 40-year career. He explains why his core companies are up to the challenge." [video]

Value Cray-Cray
08/07/22   Value Investing
"Value Spreads Are Back to Tech Bubble Highs"

Never anything wrong with value
08/01/22   Value Investing
"Keswin and Wellington walked through 60 years of data on value, showing that the average up cycle lasts eight years, while down cycles last two. If investors look beyond what the big indices are showing, it's been no different since 2008"

Keith Smith's Q2 themes
07/17/22   Value Investing
"Bonhoeffer Capital Management's Keith Smith discussed investment themes for Q2 2022, with an emphasis on Asbury Automotive Group and Scipps Networks." [video]

Valuations with and without Tech
05/29/22   Value Investing
"Turns out, the S&P 500 ex-technology is actually more expensive than the S&P 500, suggesting that large-cap tech might be relatively cheap but the devil is in the details."

Value investing is not all about tech
05/29/22   Value Investing
"The within-industry value spread (far closer to what we actually trade) is currently 95th percentile versus its own history and still 90% of the way up from median to its tech bubble peak (the prior peak before the crazy COVID driven 2020-2021 peak). The expensiveness of tech vs. the S&P 500 is 84th percentile versus its own history (so still on the high side but not the stratosphere) but only 17% of the way up from median toward its tech bubble peak."

On European value
05/29/22   Value Investing
"So it stands to reason, or at least consider, that in a more normal market environment, Europe might have a lot of catching up to do - particularly some of the value stocks across the continent."

Good news for large-cap value
05/23/22   Value Investing
"Just as economic theory would predict, over the period 1927-2021, the Fama-French U.S. large-value research index returned an annualized 12.0% versus an annualized return of 14.5% for the Fama-French U.S. small-value index (an outperformance of 2.5% percentage points per annum). Economic theory would also predict, as Vogel demonstrated, that the advantage shrinks if one uses equal weighting for large stocks - it yields a higher average monthly return than value weighting them, resulting in a smaller return spread against the small-cap value portfolio. The reason is simple: Equally weighting large value stocks creates a portfolio with more weight to smaller stocks within the large cap universe."

Crisis investing in Europe
05/23/22   Value Investing
"Just like in the US, European small value stocks outperformed the market consistently and significantly after crises."

Value spread still crazy
05/14/22   Value Investing
Cliff updates his graph ...

EM crisis investing
05/08/22   Value Investing
"The model works so well in large part because it dramatically shifts geographic exposures, as there's almost always an EM crisis happening somewhere."

Using momentum to find value
05/08/22   Value Investing
"The research demonstrates that using multiple measures of value and combining value and momentum in a strategy has produced superior results compared to using either the traditional HML value factor or the traditional momentum factor independently."

Homeland securities
05/01/22   Value Investing
"Reams of studies suggest that consistently holding the cheapest and most thinly traded stocks within a country's market provided investors with a healthy premium in the long haul. Purchasing pessimism (as reflected in low prices) pays off on long horizons. But does the same apply between countries?"

Size does not matter for value
04/17/22   Value Investing
"Based on prior academic research conducted in long/short portfolio analysis, some market participants believe that long-only Value investing works better in small-cap stocks. Our research shows that this is not true in long-only Value investing, which is how most practitioners allocate towards the Value premium. Our primary research finding is that equal-weight large-cap Value portfolios and small-cap Value portfolios are statistically similar from a returns perspective. The data suggests that value investors with a liquidity preference should allocate towards equal-weight large-cap Value portfolios. If nothing else, the data suggests that practitioners should split their Value allocations across the large-cap Value (equal-weighted) and small-cap Value since these portfolios have zero overlap but similar historical returns, highlighting a potential diversification benefit."

Generational dislocation in value stocks
04/17/22   Value Investing
"We often get asked whether value stocks are 'cheap.' The short answer is 'yes', but they have been cheap for a while. This important caveat underscores the fact that valuation tends to be a poor timing mechanism for all but true long-term investors."

Value factor comes back
04/17/22   Value Investing
"Antti's latest book does exactly that. It argues that Value (and Momentum), are still reliable long run sources of return that can (and should) be used to enhance portfolio returns during the current environment of low expected returns."

Drivers of deep value
03/30/22   Value Investing
"As expected, deleveraging and multiple expansion tend to contribute positively to returns in deep value, while earnings growth tends to be a negative contributor over a one-year hold."

Value stocks are still cheap
03/19/22   Value Investing
"Low interest rates might not justify very cheap value vs. growth, but people think they do because they're so extreme in their long-term forecast of growth"

Wise words from Walter Schloss
03/13/22   Value Investing
"A fee structure, by the way, that would make any fund managers squeamish. Schloss believed his pay should be tied to success. So he got 25% of realized gains. But if there were losses, his limited partners were made whole before he earned a cent. He only got paid when his partners made money."

Sector neutral or not?
03/06/22   Value Investing
"But for long only investors - and that is pretty much every traditional fund out there - their research finds that it is highly unlikely that a sector-neutral strategy will perform better than a strategy that incorporate sector bets."

The cross-section of stock returns before 1926
02/15/22   Value Investing
"We study the cross-section of stock returns using a novel constructed database of U.S. stocks covering 61 years of additional and independent data. Our database contains data on stock prices, dividends and hand-collected market capitalizations for 1,488 major stocks between 1866-1926. Results over this 'pre-CRSP' era reveal a flat relation between market beta and returns, an insignificant size premium, and significant momentum, value and low-risk premiums that are of similar size as over the post-1926 period."

That's it
02/13/22   Value Investing
"Global value spread at 98th percentile"

The size of the value premium
02/04/22   Value Investing
"While there are no crystal balls, there doesn't seem to be any strong evidence supporting the belief that the value premium is dead. And there may not even be any evidence that it was either smaller than Fama and French had originally found or that it is now smaller than it was originally found. The poor performance has been due to changes in what John Bogle called the speculative return (the change in relative valuations)."

Bubble stock meltdown
01/31/22   Value Investing
"This breakdown is significant, especially for growth stocks. Remember, growth stocks trend, and value stocks mean revert. The psychology is simple. People hear about a hot stock that's gone up 3x, they buy some, it goes up 2x, they buy more: the whole attraction of buying a hot growth stock is the historic return trajectory. Value stocks are the opposite: you do well buying them when they're down, as our Crisis Investing piece showed. And so, once the trend gets broken, once the magic of the rising stock prices disappears, it's a long way down until valuation becomes the justification for buying."

Conglomerates worth holding
01/15/22   Value Investing
"Power Corporation of Canada is a great example. The stock is roughly the same price today as it was in 2007. Yet it has grown its book value per share from roughly $17 to $33 during that time, and paid shareholders $18 in cumulative dividends per share to boot. To me, that.s exciting!"

Value investing after the peak
01/01/22   Value Investing
"Overall, the conclusions are the same - the five-year stretch after the valuation peak was another good time to be a value investor. Not nearly as good as after the 1999 peak, but the relative outperformance was around 13% annualized in the U.S. and 8% annualized in international markets"

That's it, that's the blog
12/19/21   Value Investing
"They say a picture is worth 1000 words. I'm embracing the concept in this post, which is just a single graph presenting the value spread constructed using the methodology that most closely reflects how we actually view value at AQR. Spoiler alert: the spread continued to explode higher in 2021. Despite this, we still made some money on value this year, which makes us very excited for 2022 and beyond."

This is the show
12/19/21   Value Investing
"Although it's difficult to know when volatility and opportunities will return, we are closely monitoring newly formed cracks in the small cap market. Specifically, as inflation has forced the Federal Reserve to reduce its bond purchases, we're noticing growing weakness in many of the stocks on our possible buy list. In effect, all boats are no longer rising. Even with the popular stock indices trading near record highs, several of the stocks on our possible buy list are becoming more attractively priced, with a growing number of stocks approaching their 52-week lows."

Building an EBITDA/EV portfolio
12/05/21   Value Investing
"How did the portfolio with the highest EBITDA yielding stocks perform over the recent decade? Terrible compared to the S&P 500, as expensive stocks dramatically outperformed cheap ones, regardless of the chosen valuation metric."

Thomas S. Gayner interview
11/06/21   Value Investing
"Barry Ritholtz speaks with Markel Corp. co-chief executive officer Thomas S. Gayner. Gayner oversees investing activities for the company - which boasts a capital portfolio of $27 billion - as well as the Markel Ventures companies." [audio]

Two sides of the coin
10/30/21   Value Investing
"Profitability and value are two sides of the same coin and ought to be considered as complementary peers or jointly in a combined strategy."

Valuations and interest rates
10/16/21   Value Investing
"Over the full and more recent sample period, we also found that none of the factor premiums had an economically significant exposure to annual yield changes, indicating that any relationship is relatively short-lived. Therefore, we can conclude that most factor premiums do not have a stable or economically material relationship with bond yield changes on an annual basis."

Not dead yet
10/16/21   Value Investing
"Current large-cap growth P/E ratios are higher than they have been over the last ten years and are similar to the ratios of the early 2000s, just before that 'bubble' burst. On the other hand, small-cap value ratios have not changed as significantly over the same period."

How quality works
10/07/21   Value Investing
"The top decile of the value factor delivers returns through change in multiples. The companies have anemic asset growth, and profitability does not improve. But multiples do. This reflects our understanding of how value works. Low multiples often reflect poor earnings. But while earnings may continue to be poor, they are not as bad as was priced, so multiples improve."

Tobias Carlisle interview
09/24/21   Value Investing
"Our discussion with Tobi revolves around: stock market fall of early 2021, valuing digital businesses, quantitative and value Investing, learning from ancient philosophers, separating the message from the messenger, and much more!"

Value vs. growth debate
09/19/21   Value Investing
"The opposing view, that a group of stocks whose underperformance is more than explained by their falling relative valuations is actually cheap, seems a far less extraordinary claim. In order for it to be true, we merely need to believe that the future prospects of value stocks are not drastically worse than they have been in either the long term or the relatively recent past."

Are value stocks cheap for a reason?
09/05/21   Value Investing
"The value spread remains unusually high, which has led investors to be concerned that value may be cheap for a reason. In this short presentation, our Portfolio Solutions Group (PSG) explains how we evaluate this spread and illustrates our view that the current high value spread is forecasting higher expected returns, and not low fundamental growth rates."

The international test
08/29/21   Value Investing
"A few anomalies were strong across regions. Most of these were value anomalies (such as price-to-book, price-to-cash flow, and price-to-earnings). Others included gross profitability, earnings surprise, and new shares issuance."

Factors in fixed income
08/29/21   Value Investing
"According to the paper, a global investment-grade strategy that uses quality and value factors generates more yield (1.55 percent) relative to the benchmark (1.33 percent). At the same time, it has a similar level of credit risk as the benchmark."

The impact of goodwill
08/22/21   Value Investing
"Liu, Yin, and Zheng.s findings led them to conclude that the negative return predictability of goodwill is due to the fact that investors underreact to the negative information on the firm value associated with high goodwill. Perhaps the publication of their paper will lead to at least a reduction in the size of the anomaly, as their findings were not limited to small firms where limits to arbitrage can allow mispricings to persist."

22 maxims of Sir John
08/02/21   Value Investing
"The most famous of Templeton's contrarian actions happened in 1939. On the eve of the Second World War, when Templeton was all of 26-years old, he borrowed a then-massive $10,000. He had decided to buy 100 shares in each of 100 companies whose beaten-up stocks cost less than a $1. Templeton judged the market was in headless chicken mode due to fears about the upcoming conflict. He wasn't sure which shares would prosper. But he was convinced they were all trading out of whack. The profits he banked when the markets recovered initiated a lifetime of running money."

Dan Rasmussen interview
07/25/21   Value Investing
"Dan then delves into leverage and the value premium, telling us how important this interaction is. He gives us great details on the subject based on a study he was a part of while at Bain Consulting. The takeaway was that roughly 50% of deals done at multiples greater than 10x EBITDA posted 0% returns to investors, net of fees."

Tim Travis on options and financials
07/25/21   Value Investing
"Tim Travis is a veteran deep value investor and money manager with a long history of success in traditional investments, such as stocks and bonds, and deep value investing. He has developed an innovative methodology of combining options and distressed investing with value investing to generate income, reduce risk, and add an element of timing." [video]

Location and the value premium
07/11/21   Value Investing
"We investigate the value-growth premium puzzle by merging insights from urban economics and finance that relate firm location to its stock performance. The value-growth premium in locations with high historical house price appreciation is 3.6% larger per year than the premium in areas that experienced little house price appreciation. The link between housing value appreciation and the cross-section of returns supports investment-based models explaining the value premium; moreover we find the house price channel reduces growth firm returns rather than increasing returns of value firms. House price appreciation remains significant after controlling for common explanations of the premium."

The value premium
07/11/21   Value Investing
"The poor performance of value stocks versus growth stocks over the past decade has led to the belief that the value premium is dead. This, however, seems to be more a U.S. market phenomenon. The Canadian value premium persists, particularly for stocks with low prices."

Maintaining the flame
06/20/21   Value Investing
"As absolute return investors, we're empathetic to the challenges of maintaining discipline throughout an entire market cycle. While refusing to overpay and protecting capital during periods of excessive overvaluation sounds easy, it is not. It's one of the most difficult duties required by a portfolio manager and fiduciary. And while it's never been easy, the current market cycle's duration and extremes have made it the most challenging cycle of our careers."

Combining value and profitability
06/13/21   Value Investing
"When viewed in combination with similar such evidence from the US, the data suggest important benefits to targeting value and profitability jointly rather than piecemeal."

Value and momentum investing
05/30/21   Value Investing
"This article examined a common question - for Value and Momentum Investing, what is the best way to combine factors? While not the first article on the topic, we provide another set of insights. When examining mid-cap and large-cap stocks in both the U.S. and international markets, and keeping the number of stocks in the portfolio the same, more concentrated portfolios historically had higher returns in the 'Separate, then combined' Portfolio as opposed to the 'Combined-signal Portfolio.' In the U.S., as one adds more stocks, the return differential gets smaller. Last, from a risk-adjusted returns perspective, there is no clear-cut winner/loser."

Value's turn
05/23/21   Value Investing
"Value's pain should eventually be rewarded just like it was in the period after 1999, when finally the performance and valuation disparity turned. Fundamentals started mattering and the market began rationally pricing assets. For a 7-year period after 1999, Value went on to trounce Growth by over 14% annually."

Predictability of the value premium
05/23/21   Value Investing
"Consider that in December 1994 (shortly after the publication by Gene Fama and Ken French of their seminal paper 'The Cross-section of Expected Stock Returns'), the relative price-to-book ratio of value stocks versus growth stocks was 2.1. Using Vanguard's Value ETF (VTV) and their Growth ETF (VUG), at the end of April 2021 that ratio had widened to 3.2 (52 percent wider), predicting a much larger value premium than Fama-French had found. We see the same pattern when looking at small value and growth stocks. At the end of 1994, the spread was 1.5. Using Vanguard's Small-Cap Value ETF (VBR) and their Small-Cap Growth ETF (VBK), the spread had widened to 2.3 (53 percent wider). Once again, the widening of the spread predicts a larger value premium than Fama-French had found. In other words, in terms of expected returns, the data suggests that the outperformance of value since April 2021 is likely to continue, as Yara, Boons, and Tamoni found that the spread has a strong predictive value two years out."

Wise words from Lou Simpson
05/23/21   Value Investing
"Lou Simpson is largely unknown, even among investors. Yet, he quietly racked up a track record that bested the S&P 500 by 6.8%."

Value still beats growth
05/16/21   Value Investing
"The analysis above shows that a very simplistic split using the P/E multiple generated about a 2.5% spread between Value and Growth over a 40+ year period. When using Quintiles, the spread was about 5.75%. For deciles, the spread was about 7.4%."

You needn't hold your winners
05/16/21   Value Investing
"If stock performances showed higher persistence than would occur through chance, then the odds would favor investors who follow Baillie Gifford's advice to keep those that got you here. But they do not."

U.K. dividend value since 1800
05/09/21   Value Investing
"I explore the U.K. Value factor, by showing its previously unseen history extended back to 1800, and illustrating the similarity between its recent drawdown and bounce back as compared to the U.S. value factor."

Resurrecting the value premium
05/09/21   Value Investing
"They sought to show that the value premium could be restored through the use of a number of simple alterations that have been long used by many practitioners, as well as academics. They augment the book-to-market ratio with three alternative value signals, which have in common that instead of relying on balance sheet information, like book-to-market (or HmL) they are more based on earnings and cash-flows."

Berkshire Hathaway meeting
05/02/21   Value Investing
"Berkshire Hathaway Chairman and CEO Warren Buffett was joined by Vice Chairman Charlie Munger, and both shared their unscripted views on Berkshire Hathaway, the markets, the economy, corporate governance, and a lot more." [video]

Value stocks are poised to outperform
05/02/21   Value Investing
"We expect value to outperform growth over the next ten years by five to seven percentage points, annualized, and perhaps by an even wider margin over the next five years."

Meb talks to Dan
03/21/21   Value Investing
"In today's episode, we start with an update on Dan's private equity replication thesis and hear about the rise of private credit in the past few years. Then we dive into his recent paper on emerging markets crisis investing. While buy and hold investors in emerging markets have experienced higher volatility for disappointing returns, Dan believes learning to navigate these EM crises can provide the ability to reap excess returns. He walks us through the differences between global and idiosyncratic crises and what performs best between both debt and equity in each case."

Joel Greenblatt and Rich Pzena talk value investing
03/14/21   Value Investing
"Legendary investors and long-time friends Joel Greenblatt (Gotham Funds) and Rich Pzena (Pzena Investment Management) recently sat down with investment strategist Steve Galbraith for a masterclass in value investing. The three long-time friends discussed a host of topics - including quality, momentum, interest rates, financials, ESG, disruption, parallels to the internet bubble, and their current positioning - along with the basics of how they define value." [video]

Good versus bad value stocks
03/07/21   Value Investing
"In this short research note, we will contrast Value & High Quality versus Value & Low Quality across stock markets."

UK value is extremely promising
02/20/21   Value Investing
"While we still like our last named trade of the decade, emerging markets value stocks, the UK equity market, and UK value stocks in particular, are now even cheaper."

Tiny titans strategy
12/19/20   Value Investing
"O'Shaughnessy Tiny Titans screen looks for the 25 companies with the highest price strength over the last year after applying the market cap and value filters"

Q3 2020 GMO letter
12/12/20   Value Investing
"No matter how we define cheap stocks - whether on book, or free cashflow, or forward earnings - they look attractive relative to history. Ten of the eleven definitions of Value presented are cheaper than they've been in at least 90% of months since 1971"

Tobias Carlisle interview
12/12/20   Value Investing
"Tobias Carlisle is a well known author. He's written extensively about value investing. In our view, Deep Value is one of the best investment books ever written."

Horses for courses
11/14/20   Value Investing
"Had you bet on large growth in the early '60s after it had built up a lead on small value over half a decade, you would have missed one of the best opportunities to bet on the opposite horse. Had you done it again in 1974 when large growth had really pulled ahead by double digits, you would have missed out again. Same for the early '90s and, of course, March of 2000. Today, large growth is way ahead of small value."

Value waves the white flag
11/01/20   Value Investing
"I'm not giving up. My principles have a strong theory behind them. My efforts are not just value, but deep value, and I have gotten my share of kicks to the gut as a result. At some point the tide will turn, even if it is private equity absorbing value stocks out of the market. The investment math is hard to break. If companies are cheap on net worth and earnings, they will appreciate."

Combining value and profitability
11/01/20   Value Investing
"Adding profitability on top of a value strategy reduces the strategy's overall volatility."

09/19/20   Value Investing
"Running a Value fund is somewhat like being stranded on a tiny tropical island out in the ocean. You can't really run away and are exposed to the harsh forces of nature. If you're lucky, there might be a coconut tree or big rock providing some shade. But it will still be hot most of the day, regardless of where you're sitting, and often you have to watch out for falling coconuts."

The value premium in Canadian stocks
08/30/20   Value Investing
"The value premium is also strong for low-price stocks, varying from 11 per cent to 12 per cent during the period from 1983 to 2000, to between 5 per cent and 8 per cent from 2001 to 2018. Low-price stocks tend to be more obscure, are followed by fewer analysts and are typically less liquid than high-price stocks."

2 decades of value with Chris Mittleman
08/22/20   Value Investing
"Chris Mittleman runs Mittleman Investment Management, an SEC-registered investment adviser. MIM employs a concentrated, long-term investment approach, typically holding between 10 and 20 positions." [video]

Times that try stock-pickers' souls
08/14/20   Value Investing
"As maddening as this behavior is, it is typical of investor psychology at peaks and troughs; and consequently, the 'price' of growth is higher than it has ever been."

Death and the demand for growth
08/09/20   Value Investing
"If history is any guide, 10 years from now, among seasoned (i.e., not recently IPO-ed) firms, approximately 1.4% of large firms and 19% of small firms will have died a bad death"

Stranger things
08/01/20   Value Investing
"The stock market is noisy, and strange things can happen over three, five, even ten years. But over the long haul, investors eventually get what they pay for. Those who buy expensive equities at low yields usually realize low returns over the long run. And investors who buy cheap stocks at high yields can realize high returns - provided they stick with the strategy over the long haul."

Nate Tobik talks to Tobias Carlisle
08/01/20   Value Investing
"Nate Tobik is the Founder of CompleteBankData, author of the Bank Investors Handbook, and writes about deep value stocks in the Oddball Stocks Newsletter" [video]

Handling the crisis
07/18/20   Value Investing
"Of the firms we surveyed, 56% took measures to shore-up their liquidity position, 44% adjusted their workforce, and 16% adjusted wages and compensation."

Value in recessions and recoveries
07/04/20   Value Investing
"Value, quality, and small-cap strategies all tend to perform well during recoveries regardless of the catalyst for the bear market and recession."

Beyond the zero bound
07/04/20   Value Investing
"Perhaps the most significant conclusion to draw from Japan's experience during ZIRP therefore is not about the special impact of a low-rate environment. As we see it, interest rates were relevant in predicting bond returns and the poor performance of bank stocks, but other asset classes were better predicted by relying on entry valuations and yields."

Grandpa stocks
06/26/20   Value Investing
"With a 30% FCF yield, grandpa doesn't have to live another lifetime to add a great deal of value to a portfolio."

Room to run
06/26/20   Value Investing
"The market today is a tale of two cities. Growth stocks are trading at very rich valuations as their prices have shrugged off any economic effects of coronavirus, whereas value stocks are trading at deeply discounted valuations that reflect significant fear about the pandemic's economic impact."

5 factor investing tips
06/12/20   Value Investing
"Value, generally represented by portfolios of cheap stocks, holds up well in the analysis. Enterprise multiples and price-to-earnings generate some of the strongest results, however, the practitioner favorite - book-to-market - while able to be replicated, certainly doesn.t yield the strongest results."

Two centuries of value and momentum
06/06/20   Value Investing
"Both Value and Momentum have crawled out of even deeper drawdowns in the past."

Volatility and value
05/31/20   Value Investing
"Historically, as uncertainty abates, and spreads contract, value outperforms"

Value and interest rates
05/23/20   Value Investing
"We find no evidence that links the size of the value premium to the level of interest rates, and therefore our results do not support assertions that a change in interest rate environment is a necessary condition for value's recovery from the last decade. Neither do our results support assertions that interest rates or the yield curve have been a major driver of value underperformance during the sharp drawdown from 2017 to 2019 or over the past decade."

Trend following in growth and value
05/15/20   Value Investing
"Value returns appear to be inversely correlated to historic returns: the worse value's recent performance, the higher the expected return. Growth appears to be the opposite: the better the historic return, the higher the expected future return. Value is mean reverting. Growth trends."

Value investing is not dead
05/09/20   Value Investing
"We think the medium-term odds are now, rather dramatically, on the side of value, with no 'this time is different' explanation we can find (and we've tested a lot of them!) holding a drop of water and no other period in the 50+ year history matching today."

Rob Arnott interview
05/03/20   Value Investing
"I had a chance to connect with Research Affiliates Founding Chairman Rob Arnott to talk about his most recent presentation, which deals with the economy, falling stock prices, valuations and the death of value investing." [video]

Tobias Carlisle talks micro
05/03/20   Value Investing
"Q&A with Tobias Carlisle, Acquirer's Fund at the Planet MicroCap Showcase Virtual Investor Conference 2020." [video]

Historic opportunity in small caps
04/24/20   Value Investing
"Following extreme periods like this historically, small value outperformed large growth by 16.8% annualized over the following 10 years."

Dan Rasmussen on microcaps
04/24/20   Value Investing
"Dan Rasmussen talks about microcaps and value" [video]

Yesterday's profits
04/17/20   Value Investing
"Unless you were concentrated in extremely high-expectation large growth stocks, we believe it was a very bad call to get out of equities because earnings were forecasted to disappoint."

Cheap winners vs boring winners
04/17/20   Value Investing
"Should investors prefer boring over cheap winners? Based on this analysis, there is no clear answer. The Low Volatility factor had significantly lower drawdowns than Value, but both feature low correlations to Momentum, which creates attractive multi-factor portfolios. Cheap stocks have not performed well over the last decade, but are cheaper, per definition, and low-risk stocks exhibit interest rate-sensitivity."

Small Cap Value
04/12/20   Value Investing
"You can see the returns coming out of a crisis tend to be far stronger in small value stocks than their large cap brethren. In fact, the numbers have been substantially higher."

Priced In
04/11/20   Value Investing
"In our view, it's buying cheap securities that likely won't experience bankruptcy. In debt, we think the place to do that is higher-quality high yield. In equity, we think the place to do that is deep-value equities that are also statistically unlikely to go bankrupt."

The valuesburg address
03/06/20   Value Investing
"It is for us the survivors, rather, to be dedicated here to the unfinished work which those who invested in cheap stocks (and the truly fallen who shorted expensive ones) have thus far so nobly advanced."

Dan Rasmussen interview
02/21/20   Value Investing
Dan Rasmussen talks private equity and value [audio]

Venial sin punished quickly
02/21/20   Value Investing
"The point is a simple one. Value has started 2020 with an extremely severe loss versus very long-term history, and, defined in a wide variety of ways, the worst loss yet (examining all of the same 6-week length periods) over the entire long 2010-2020 value drawdown."

Crisis investing
02/15/20   Value Investing
"We have spent the past year studying every financial crisis in the US since 1970. We have done this work for your benefit, so that you will keep your head when all about you are losing theirs. When weak hands fold, when forced sellers liquidate, we hope this research will help you make good decisions."

Historical value
02/15/20   Value Investing
"While they may not have been known by the same names, many modern investment factors have historical roots stretching back centuries."

Liquidity and factor returns
02/07/20   Value Investing
"We observe that the performance of the factor decreased consistently as the minimum liquidity constraints increased. This result can be explained by cheap stocks frequently being small stocks, i.e. having exposure to the Size factor. Removing these small and cheap stocks led to lower factor performance."

VAH:Value vs Glamour
02/01/20   Value Investing
"How HEI ran 47,500%; Anti-FOMO Starter Size Rules; and Value vs Glamour" [video]

Value's death exaggerated
01/17/20   Value Investing
"Over the last 12 years, the relative valuation of value and growth moved from the 21st percentile to the 97th percentile. This revaluation explains most of value's underperformance. Today, the relative valuation level is close to the most attractive valuation level in history at the peak of the tech bubble in 2000."

VAH: Akre
01/17/20   Value Investing
"S02 E02 Akre Never Sells, What Buffett Should Buy and Damodaran's Market Delusion" [video]

O'Shaughnessy Q4 2019 letter
01/17/20   Value Investing
"our updated in-house 10-year point estimate for the U.S. market's nominal total return fell during the year, and now sits at ~1.5% annualized, which would mean a ~16% total return over the next decade."

Value's underperformance
01/10/20   Value Investing
"Critics of value investing have declared the death of value. However, the empirical analysis suggests it is unlikely because the size of the current drawdown, while painful, is not an outlier, and the pre- and post-2007 data suggest there have been no statistically significant changes in the two drivers of the value premium - migration and profitability. The simple explanation for value's underperformance is the relative increase in the valuations of growth stocks."

Value after hours
12/27/19   Value Investing
"Passive melt-up and more" [video]

The presumed end of value
12/16/19   Value Investing
"after almost all investors have left the Value segment and even fundmanagers have softened their strategies with Growth criteria, there are inter-esting opportunities in the Value segment. Even though it is impossible to predict when the cycle will rotate and Value will make a comeback, it can be concluded that a more contrarian trade than Value is currently hard to find; and in recent decades Value has rarely been as attractively valued as today." [pdf]

Improving deep value strategies
12/16/19   Value Investing
"Their findings are consistent with prior research. For example, the use of multiple value metrics, composite scores, and negative screens is now common among many quantitative fund providers."

Unit economics
12/03/19   Value Investing
"Bluegrass Capital talks modern value with Tobias Carlisle" [video]

Floyd Odlum
12/03/19   Value Investing
"He then pooled together another $39,000 to form his first partnership. That original $39,000 grew to $150M in controlled assets. All that during a span of just twelve years."

Long-only factors
11/26/19   Value Investing
"In contrast to recent research from Novy-Marx and Fama and French, the long leg of the low-risk and value premiums are NOT explained by the profitability and investment factors. The low-risk and value premiums are actually unique. In contrast, the short-leg of the low-risk and value premiums (i.e, the high risk and expensive stocks) can be explained by the profitability and investment factors."

Value after hours
11/26/19   Value Investing
Memories of Nortel in the TSE 35 edition. [video]

Dr. George's paper
11/22/19   Value Investing
"The purpose of this paper is to examine whether earnings quality contributes to the book-to- market's predictive power in the cross section of stock returns. Earnings quality is embedded in the value-growth effect given that retained earnings is a key part of the book value of equity. Earnings quality reflects the effects of managerial discretion on reported earnings, which has been shown to be associated with both risk and behavioral biases in asset pricing. Our results affirm the existence of a value premium and show that the value premium is more pronounced within poor earnings quality stocks. Moreover, we find that poor earnings quality contributes to the value premium mainly through the pricing of growth stocks. Our results suggest that the quality of reported earnings has an incremental role in shaping expected returns of value versus growth stocks."

Time for a venial value-timing sin
11/08/19   Value Investing
"To evaluate this, we look at how to measure whether a factor, in this case the value factor, is itself rich or cheap versus history. We look at three approaches, from academic to more AQR-like, and the answer, regardless of the approach taken in measuring cheapness, is that value is currently quite cheap compared to history. And it has gotten that way over the last almost two years."

Ian Cassel interviews Tobias Carlisle
11/08/19   Value Investing
"Ian Cassel is Chief Investment Officer at Intelligent Fanatics Capital Management. He turns the tables on Tobias to discuss deep value, the acquirers multiple and Acquirers Funds, LLC." [video]

Compounding machines
11/08/19   Value Investing
"Join us for a rare interview is Chuck Akre and John Neff of Akre Capital Management" [video]

Jack Forehand on applied value
11/01/19   Value Investing
"Jack Forehand is a partner at Validea Capital and is responsible for the firm's overall operations and portfolio management." [video]

Costs and returns from factor portfolios
10/22/19   Value Investing
"Well-designed, factor-based funds are able to capture the returns provided by both the size and the value factors."

O'Shaughnessy's Q3 2019
10/18/19   Value Investing
"The rapid stretching of growth multiples in large cap, and the breadth of highly-levered, money-losing companies in small cap stand out as dominant themes in this market."

Owner managers
10/18/19   Value Investing
"Joe Boskovich talks to Tobias Carlisle about finding great owner/operators." [video]

Graham's Net-Nets
10/11/19   Value Investing
"The implication of calculating the arithmetic mean return vs the geometric mean return is stark. The arithmetic mean would, on the balance of probability, have materially overstated returns."

Beyond the 500
10/11/19   Value Investing
"The cost of adding a standard liquidity filter to systematic value portfolio takes about 4-5% off your returns"

Jim Mitchell on microcaps
09/24/19   Value Investing
"His fund documents illustrate just how unusual his strategy is. They refer to market capitalization 'below $100 million,' no 'quarterly SEC filings,' and average holding periods of 'more than five years.' This is not a typical investment vehicle. But he has been at it for more than 38 years and racking up impressive returns in the process."

Why value investing works
09/17/19   Value Investing
"Greenblatt's simple idea is so insightful. Value investing works (over the long term) because it sometimes does not work (in the short term)."

Thomas Braziel on distressed activism
09/17/19   Value Investing
"Thomas Braziel is the managing partner at 507 Capital, an investment firm specializing in unlisted credit opportunities. Thomas hunts for very unusual, off-the-run opportunities in bankruptcy, and presses his claims through activism, receivership and other active means." [video]

Value and the yield curve
09/06/19   Value Investing
"We observe that the returns of the Value factor were negative when the yield curve was flattening and positive when steepening in the period between 1971 and 2019. These results are intuitive as a steepening yield curve typically implies a risk-on environment where investors are more inclined to take larger risks, such as betting on cheap, but problematic companies. On the contrary, when the yield curve flattens, investors tend to expect worsening economic conditions and are more likely to allocate to stocks associated with safety."

Factor investing works
08/31/19   Value Investing
"Don't fall for claims by highly respected asset managers that factor-based investing isn't working. Factor-based strategies have outperformed capitalization-weighted indices over long time horizons."

Contrarian investing in commodity cyclicals
08/31/19   Value Investing
"Some investors avoid these cyclical industries because of their wild and unpredictable fluctuations, but these data suggest that using economic data to evaluate investment opportunities in cyclicals and buying at economic troughs can provide above-market returns."

Bye-bye net-net
08/31/19   Value Investing
"The problem for the value investor is that long-term leases create long-term assets, so the assets are not part of working capital, but, to adhere to IFRS 16, the increased liabilities are deducted to calculate net-net working capital. With current assets unchanged and total liabilities increased, there will be even fewer companies that pass the net-net working capital screen. I think that it is now an interesting historical artifact with no practical application for today's investors." [$]

How painful can factor investing get?
08/19/19   Value Investing

Fraud spotting
07/31/19   Value Investing
"The portfolio manager's smile and relaxed posture immediately disappeared. With a furrowed brow he asked me to confirm: in Florida? Yes, in Florida. Why, was that a particularly poor state to purchase a house in?"

Vol can be improved
07/31/19   Value Investing
"Not all low-volatility stocks outperform. Those that are expensive relative to their profitability actually underperform the market."

Tobias Carlisle talks to Tim Melvin
07/26/19   Value Investing
"Before writing full time, Tim was vice president at Ferris Baker Watts, a boutique investment firm, where he specialized in deep value investing. He has also worked as a stockbroker, advisor and portfolio manager." [video]

Value investing and concentration
07/26/19   Value Investing
"Given that Value beat Growth over this time sample, what one finds is that on average, the more concentrated the portfolio (on average), the higher the CAGR over this time period (especially when keeping the holding period the same). Additionally, over the full-time period, while there is deviation amongst the Value metrics, they are generally similar in CAGR performance."

Long live value
07/26/19   Value Investing
"Value has underperformed since the beginning of 2007. Another prolonged period of underperformance for Book-to-Price and Earnings-to-Price happened between 1926 and 1941."

Eric Cinnamond interview
07/07/19   Value Investing
"Eric Cinnamond, CFA is a partner at Palm Valley Capital Management and a portfolio manager at the Palm Valley Capital Fund (PVCMX). Eric focuses on absolute return small cap value" [video]

On the value factor
06/26/19   Value Investing
"Given that the performance of the Value factor is similar across stock markets and asset classes, indicates one common driver that is likely related to market structure. Our research suggests that it is mainly risk sentiment that is driving the performance of the Value factor, although that framework requires further validation."

Tobias Carlisle talks to Dan Rasmussen
06/26/19   Value Investing
"Verdad's Founder and Portfolio Manager Dan Rasmussen talks about his replication of private equity investing in the public markets using undervalued, levered, small-cap stocks." [audio]

Curious Chuck Akre
06/21/19   Value Investing
"My guest today is Chuck Akre, a now widely famous investor who founded Akre Capital Management in 1989, which now manages approximately $10B dollars. We discuss his investing style and his 'three-legged stool' for evaluating companies. Please enjoy this great conversation." [audio]

Tobias Carlisle talks to Peter Rabover
06/21/19   Value Investing
"Peter "Russian Bear" Rabover, CFA is the Managing Director at Artko Capital based in San Carlos, California." [video]

What works
06/15/19   Value Investing
"From January 1, 1963, through December 31, 2012, the stocks in the best decile of the value composite earned an average annual compound return of 17.3%, approximately 6.2% better than the All Stocks universe, which earned 11.1% over the same period."

Is value overcrowded?
06/15/19   Value Investing
"Summarizing, comparing relative valuations at the end of 2018 to those at the end of 1999, we find that, with the exception of the still-wide gap in the P/B of large growth stocks, the rest of the ratios look similar, with (in terms of P/E) small growth being relatively far more expensive (with a ratio of 6.1versus 5.1) than it was just before the growth bubble burst in 2000."

Indigo to go private?
06/15/19   Value Investing
"Minority shareholders will be reluctant to tender at the current depressed price, but by chance we have tangible evidence of what a smart insider thought the stock was worth a year ago. During several weeks in January and February of 2018, Mr. Schwartz reported significant insider purchases of Indigo shares in the $19-to-$20 range."

Jim O'Shaughnessy talks to Tobias Carlisle
06/06/19   Value Investing
"Jim published his first book Invest Like the Best in 1994, followed by the first edition of What Works on Wall Street in 1997, How to Retire Rich in 1998, and Predicting the Markets of Tomorrow in 2006." [video]

F Score in Australia
06/06/19   Value Investing
"We show that when applied to the 200 largest stocks in the Australian market, the Piotroski signal generates long/short portfolio returns of 1.0% per month. However, much of this return is on the short side. The long/short return is much higher against smaller cap stocks and is evenly balanced between the long and short sides. Positive returns are generated in 74% of months. The premium to high F score stocks is robust to controls for the size, value and momentum risk premia. We use three separate tests to show that the standard explanation for the power of the F score signal - analyst neglect of the news contained in small stocks - isn't supported by the data. Other underlying forces must be at work."

Interest rates and returns
05/20/19   Value Investing
"Across multiple interest rate cycles in the United States between April 1965 and December 2017, there has been no meaningful relationship between changes in interest rates and returns on the broad equity market, small value stocks, or leveraged small value stocks."

Valuation horse race
05/01/19   Value Investing
"Value isn't necessarily dead - it all depends on how you measure it, when and where it is measured. This inconsistency suggests that value is merely 'noisy,' which is well-established."

Concentration is cool
04/21/19   Value Investing
"Sharpe ratios tend to be maximized in a value portfolio around 25 positions."

Fairfax Lollapalooza 2019
04/03/19   Value Investing
Check out the schedule of events for next week's Fairfax Lollapalooza.

Forward vs trailing price to earnings
04/03/19   Value Investing
"It also became clear in my study that had an investor focused on low trailing P/E ratio stocks she would have done much better than focusing on low forward P/E ratio stocks."

Guy Gottfried talks at Ivey
03/18/19   Value Investing
"Guy Gottfried talks to Dr. George's class" [video]

Growth at a reasonable price works
03/11/19   Value Investing
"Our results suggest a GARP approach can generate enviable results, although how enviable depends on the observation period. Perhaps the strategy's key benefit is forcing investors to adopt a systematic framework so they can allocate to exciting growth stories - the rising Amazons - albeit only when they are trading at reasonable valuations."

Guy Gottfried at Ivey
03/11/19   Value Investing
"Ivey Business School's Value Investing Program of 2019 welcomed Guy Gottfried as a Guest Speaker." [video]

The dirty little secret of value funds
02/20/19   Value Investing
"The mystery is deepest in the case of value funds. Many shelves of academic research have demonstrated that one of the more dependable ways to beat the market, at least on paper, is to buy cheap stocks and shun expensive ones." [$]

Why most active managers fail
02/20/19   Value Investing
"To put it simply, the cheapest stocks are disproportionately small in terms of size and volume. This means that an active manager looking to choose, say, the best 40 of these stocks would be unable to manage more than $200M or so. Even a more passive, quasi-indexed, approach owning the 200 cheapest stocks could only handle about $1B."

Time varying factor premiums
02/20/19   Value Investing
"For value investors, the above findings are good news, as the relatively poor performance of value stocks in the U.S. over the past decade has led to a widening of the book-to-market spread between value and growth stocks, restoring it to about the same level it was when Eugene Fama and Kenneth French published their famous study"

Looking for the intuition
02/12/19   Value Investing
"After a very tough 2018 for many quantitative strategies, particularly in market-neutral stock selection, one hurdle many investors face is getting some basic intuition about results, and even more elementary, about what one actually owns in such a portfolio. This matters as the more intuitive something is the easier it is, all else equal, to stick with it. I can't fully fix this problem. A multi-factor process, by design, lacks simple one-liner explanations. Frankly, that's much of the idea of diversifying across factors and stocks. But, while I can't fix this completely, I do hope I can help."

Where is the Value
02/05/19   Value Investing
"The countries noted above as being deeply discounted relative to peers and history are also showing up as having favorable Earnings Growth relative to peers - Portugal, Greece, and Russia."

Bob Robotti's blog
01/28/19   Value Investing
"In this first video Bob Robotti follows-up on our year end letter with the story of Mr. Market, a tale well known to value investors. We look forward posting more short videos as a regular feature of the blog."

Battle for Stuart Olson
01/16/19   Value Investing
"As a long-term shareholder, I wish Crescendo Partners and Jamarant Capital every success in their quest to reduce the valuation discount that we all see in the Stuart Olson stock price. Depending on whom they nominate for the board, I may very well vote for their candidates. But in spite of my optimism, I suspect that we have seen only the opening salvo of a protracted battle for the future of the company." [$]

Humans love a narrative
12/10/18   Value Investing
"What that means is that if you can eliminate companies with really bad balance sheets or really poor quality businesses, or that are trading at crazy expensive multiples, then you can gain a lot versus the broad market as opposed to simply buying the absolute best balance sheets or the companies with the highest returns on capital."

Alpha within factors
11/05/18   Value Investing
"it's possible to generate alpha within the value factor by shifting its allocation in the direction of stocks with better future earnings outcomes. We used additional factors that are correlated with those outcomes--specifically: momentum, trailing growth, accruals and leverage--to filter out value traps and identify the strongest companies out of what remains."

Size matters
11/05/18   Value Investing
"This suggest that if there are excess returns anywhere in the market, those returns are in precisely the stocks that are on the verge of being inaccessible to most fund managers (and ETF products) seeking to run higher amounts of assets under management."

Tom Gayner interview
11/01/18   Value Investing
"Gayner went to the University of Virginia and studied accounting, following which he went to work for PricewaterhouseCoopers. While working as an accountant, he realised that he had made a mistake and soon decided to shift to investing" [video]

O'Shaughnessy Q3 2018 letter
10/22/18   Value Investing
"The internally financed, high investment group outperformed the debt financing, low investment group by 3% per year, annually. That is a large number in a large cap universe"

The odds of value
10/15/18   Value Investing
"Allocating tactically based on the market skewness might be considered unusual given the abstract nature of skewness. However, the skewness of the stock market can perhaps be understood as a measurement for the risk sentiment of investors. If risk aversion prevails, then investors are less likely to be interested in cheap, but problematic stocks and Value investors will not get compensated for holding undesirable stocks."

Micro and small cap factor investing
10/09/18   Value Investing
"The quality factor is most effective in micro caps, successfully screening out the deteriorating businesses."

3 shades of value
09/29/18   Value Investing
"Rebalancing into ultra-cheap shares at the market's lowest point helped these funds outperform VTI in 2009 as the recovery got underway. DFA U.S. Large Cap Value, Invesco FTSE RAFI US 1000 ETF (PRF), and Invesco S&P 500 Pure Value ETF (RPV) had excess returns of more than 2 percentage points over VTI from March 2009 through June 2018. RPV had the best returns of the bunch, outpacing VTI by 6.3 percentage points annually."

Go small value
09/24/18   Value Investing
"Small-cap value is where you have a fighting chance of finding the alpha opportunities passed over by the big guys. With little sell-side coverage or institutional ownership of these stocks, your research could lead you to a proprietary insight and significant upside."

Bruce J. Flatt talk
09/06/18   Value Investing
"In this talk, Bruce Flatt, CEO of Brookfield Asset Management, shares his journey, the challenges faced by Brookfield over the decades, key ideas that have shaped it's philosophy for successful investing and principles for enduring through times good and bad." [video]

Share buybacks: a global perspective
07/23/18   Value Investing
"For example, in the United States, the S&P 500 Buyback Index has pummeled the overall market, averaging annual returns of 13.98% since January of 1994, versus 9.05% for the S&P 500 over the same period"

Deconstructing the low vol anomaly
07/23/18   Value Investing
"Research has provided persistent and pervasive evidence that the low-volatility anomaly, at least in stocks, is well explained by other common factors, specifically the value factors of D/P and E/P, the profitability and investments factors, and the term factor. This makes the low-volatility factor redundant for portfolios that already have exposures to these factors."

O'Shaughnessy letter
07/23/18   Value Investing
"Is Value ever going to work again? Since 2010, the Russell 1000 Growth index has outperformed the Russell 1000 Value index by roughly 70%, leaving many investors wondering if Value's historical edge will persist, or whether, instead, the future will be more random."

Lessons from Jim O'Shaughnessy
07/23/18   Value Investing
"We are, by our very nature, story-loving animals, and we create stories to create narratives that help us make sense of what is going on around us in the world, and many times, those stories are wrong. And so, from our perspective, trying to make a successful forecast, short-term forecast, is a virtual impossibility, because, in the short term, there's quite a bit of noise in the marketplace. And people mistake noise for signal, and they have a narrative about it, and it's very believable, but unfortunately, often wrong. So we don't make forecasts in terms of what the market's going to do over short periods of time because quite frankly, we don't know. And if others were honest, they would have to admit that they don't know, either. However, we do make forecasts based on very long-term time in the market."

Long live value
07/23/18   Value Investing
"We discuss how difficult the market has become for active investors, thematic investment opportunities, and the potential sources of market mispricings." [audio]

The art of catching falling knives
07/09/18   Value Investing
"Ashok Leyland was a case of falling knife for me, and I did not want to get hurt catching it mid-air on its way down. But I learned something about catching falling knives from this mistake of omission, which has helped me in my subsequent decision making."

In defense of the value premium
06/25/18   Value Investing
"In fact, even though the value premium has been quite large and persistent over the long term, it has been highly volatile."

Lou Simpson wisdom
06/04/18   Value Investing
"One thing a lot of investors do is they cut their flowers and water their weeds. They sell their winners and keep their losers, hoping the losers will come back even. Generally, it's more effective to cut your weeds and water your flowers."

Factors from scratch
06/04/18   Value Investing
"The excess returns associated with Value and Momentum result from convergent and divergent processes, respectively. Value stocks are systematically underpriced and gradually converge on their fair value over time. Momentum stocks start out fairly valued or slightly overvalued, and go on to become more overvalued in the short-term, before reverting back. Both styles represent a market mistake that can be captured as alpha."

Replicating in Europe
05/23/18   Value Investing
"For context, the 4.5% premium of leveraged small value over small value is similar in magnitude to the 3.8% premium that we observed in our US research from 1965 to 2017. While the premium in the US includes in-sample data that was used to train the ranking algorithm, the observation of a 4.5% premium in Europe is completely out of sample."

Graham & Doddsville: Spring 2018
05/07/18   Value Investing
"This is a bittersweet issue for us. Bruce Greenwald, the Academic Co-Director of the Heilbrunn Center, retires at the end of this academic year"

The process matters
05/07/18   Value Investing
"After doing more research, I realized how much process mattered when it came to selecting which value stocks to invest in."

Factor investing: art and science
04/30/18   Value Investing
"Having studied finance for a long time, I think I now know less about how the stock market works. In fact, I probably should have stopped studying finance after I read Ben Graham's Intelligent Investor, over 20 years ago. Life would be a lot easier, or at least less complicated. Adhering to Graham's straightforward value investing ethos certainly worked out for Warren Buffett"

Joel Greenblatt talks to Barry Ritholtz
04/22/18   Value Investing
"Bloomberg View columnist Barry Ritholtz interviews Joel Greenblatt, co-founder of Formula Investing LLC and managing principal, co-chief investment officer and portfolio manager at Gotham Short Strategies and Gotham Asset Management LLC." [audio]

Martin J. Whitman dies at 93
04/22/18   Value Investing
"Martin J. Whitman, who made .safe and cheap. a value-investing mantra during more than two decades managing the Third Avenue Value Fund, has died. He was 93."

High conviction buybacks
03/19/18   Value Investing
"Buybacks may not be well timed in aggregate, but they have been timed well (at least, timed at cheaper relative prices) by firms with high conviction buyback programs. These firms can get lost in the shuffle because, on average, the cash spent on buybacks by these high conviction firms represent a minority of the total cash being spent on buybacks."

Simple value strategies win
03/19/18   Value Investing
"While relative-value strategies do seem to add value over a passive index, it appears investors would be generally better off if they relied on simple P/E-based investing."

Capex darlings and the myth of long-termism
03/19/18   Value Investing
"part of the allure of buybacks is the signal to shareholders that management will not fritter away precious capital on dubious projects"

Sequential models
03/05/18   Value Investing
"The sequential model allows investors to prioritise factors and has the advantage of resulting in a concentrated portfolio of stocks. However, the prioritisation requires investors to have a strong preference for specific factors, which can be a difficult choice given that factors tend be highly cyclical."

Thomas Russo talks at Google
02/26/18   Value Investing
"Thomas Russo describes the important ingredients of his tax-efficient, long-term buy-and-hold approach to global value equity investments." [video]

High-debt value
01/29/18   Value Investing
"Dan then delves into leverage and the value premium, telling us how important this interaction is. He gives us great details on the subject based on a study he was a part of while at Bain Consulting. The takeaway was that roughly 50% of deals done at multiples greater than 10x EBITDA posted 0% returns to investors, net of fees." [audio]

Value and momentum portfolio construction
01/22/18   Value Investing
"Being a Value investor is difficult, given that the stocks of a Value portfolios tend to have inherent issues, otherwise, these stocks would not be cheap. Being a B/M-focused value investor over the past decade has been especially hard, as the factor returns were effectively zero - plenty of pain, but no gain. Experiencing this factor cyclicality often leads investors to contemplate adding other factors in the hope of improving performance. An obvious candidate would be Momentum, as cheap and rising stocks are more appealing than cheap stocks. However, it is not quite straightforward for investors to add Momentum to a Value portfolio as there are several options available. In this short research note, we will analyze Value & Momentum portfolios created by three common multi-factor model approaches - the combination, the intersectional and the sequential models."

Fundamentals of value investing
01/22/18   Value Investing
"An interview with Value Investor, Joel Greenblatt. In this interview Joel discusses his approach to Value Investing and its core elements. Joel also discusses his career including examples of investments and why they were successful or not." [video]

Graham & Doddsville Winter 2017
12/24/17   Value Investing
"There is no investment is without risk. But paying 4x earnings eliminates a lot risk."

Wes Gray on QVAL
12/18/17   Value Investing
"Wes Gray, CEO of Alpha Architect, says he searches the 'trash bin' for companies in order to find 'deep value' in the QVAL ETF. He joins Bloomberg's Scarlet Fu and Eric Balchunas." [video]

Bill Nygren Talks at Google
12/18/17   Value Investing
Oakmark fund manager Bill Nygren talks about value investing at Google. [video]

Countering the narrative about value
12/04/17   Value Investing
"By using the price-to-book ratio (or "P/B") as a primary determinant of value, the Russell 1000 Value index has tended to favor stocks from sectors with generally low P/B ratios, such as financials and energy companies, while excluding stocks from sectors such as technology and consumer staples, which may look cheap relative to earnings or cash flows, but have lofty P/B ratios. This, combined with a lack of sector constraints, means that comparing Russell 1000 Value to Russell 1000 Growth is really more akin to comparing energy and banks to consumer and technology stocks"

Factor investing and trading costs
12/04/17   Value Investing
"Trading costs degrade performance. Factor investing strategies have capacity constraints. Higher turnover factors have lower capacity constraints than lower turnover factors."

Going deep on contrarian factor timing
12/04/17   Value Investing
"we study all the interesting things that happen when some stocks, or other assets, get deeply cheap while others get deeply expensive and, in the process, learn more about the economics of value investing, and how timing works when you sin a little but now in lots of places at once"

Microcap as an alternative to private equity
11/27/17   Value Investing
"Private equity has become a central component of many institutional and high-net-worth investment portfolios over the past decade. While private equity offers potential advantages, it also requires taking distinct risks. This paper highlights an alternative to private equity - microcap equities - which mitigates several of these risks."

Fairfax vs. Berkshire Hathaway
11/20/17   Value Investing
"We find that while value beats growth (that is, the value premium is confirmed) in the total sample (on average, by 430 basis points annually - a basis point is 1/100th of a percentage point), the value premium is actually driven by the firms with the poorest earnings quality. The average value premium for the best earnings quality firms (the top quartile) is 60 basis points, whereas the corresponding value premium for the poorest earnings quality firms (the bottom quartile) is 960 basis points. That is, an investment strategy that emphasizes lower-quality value stocks will improve the long-term performance of a value portfolio."

Lou Simpson interview
11/11/17   Value Investing
"There's also a negative correlation between the number of people making the investment decisions and the results. If you have a lot of people involved, you tend to have the least competent person making the decision, because you need consensus."

Joel Tillinghast interview
11/06/17   Value Investing
"The fund's definition of low-priced is changing in November, from a price at time of purchase of under $35, to either a price under $35 or a higher-than-index earnings yield (that is, a low P/E). The original price test was meant to include small-cap stocks, but also larger companies that were temporarily depressed and turning around. The newer test is looking for low-priced relative to intrinsic value, which is how I have always run the fund."

Tobias Carlisle interview
10/30/17   Value Investing
"Toby tells us that the book describes a simple way to find undervalued companies. In essence, you're trying to find a company trading below its intrinsic value. This is how to get a great price as a value investor. Of course, you get these prices because things don't look too rosy with the stock - there's usually a crisis or some hair on it" [audio]

Graham and Doddsville: Fall 2017
10/23/17   Value Investing
"In this issue, we were fortunate to speak with five investors who provide a range of frameworks and investment styles. All of these investors focus on understanding downside risk, developing a differentiating view, and studying history."

Value stock returns
10/07/17   Value Investing
"Examining the 5-year and 10-year results, one finds similar (but much more pronounced) results as in the mid/large-cap stocks. At a 5-year level, there are more Growth stock losers (highly negative returns) and at the 10-year return level there are more big winners from the Value stocks."

The death of value
10/01/17   Value Investing
"Clearly, value investing, as proxied by a portfolio that buys cheap stocks based on price-to-book ratios, ate crow over the past 10 years. Why?"

Value in the value factor
09/17/17   Value Investing
"Value and Size are cheap while Low Volatility and Growth are expensive"

Value investing is difficult
09/17/17   Value Investing
"Whilst in its basic form a value approach may be considered elementary compared to other investment styles, it is the most exacting behaviourally; this is a key reason why a long-term premium exists for owning value stocks and why both active managers and fund investors struggle to embrace the discipline."

Finding takeover candidates
09/17/17   Value Investing
"There is no guarantee that stocks trading below net collateral value per share will be subject to a takeover offer or go private, but the numbers make it feasible to buy the company with no money down. That is why they are intriguing candidates for a patient investor."

Tim's letter
09/11/17   Value Investing
"I realize the general market is relatively expensive and there are many uncertainties. This is reflected in our cash position which represents just under 25% of our net assets at June 30th. Additionally, in August we purchased a modest amount of portfolio insurance in the fashion of 'put options'. The recent sale of our position in Polaris will raise cash to over 35% of net assets giving us both downside protection and the ability to take advantage of investment opportunities."

Seth returns cash
09/11/17   Value Investing
"Value investors seek stocks that they believe are undervalued by the market. A more than eight-year bull market has made stocks expense on a number of historical measures, leaving fewer bargains to be found."

Tom Russo on global investing
08/30/17   Value Investing
"Tom looks for companies with strong cash-flow characteristics, where large amounts of 'free' cash flow are generated. Portfolio companies tend to have strong balance sheets and a history of producing high rates of return on their assets. The challenge comes in finding these obviously desirable situations at reasonable or bargain prices. Tom's investment approach is focused on a small number of industries in which companies have historically proven to be able to generate sustainable amounts of net free cash flow. (These industries typically have included food, beverage, tobacco, and advertising-supported media.)" [audio]

Buying moats
08/28/17   Value Investing
"My guest this week is Pat Dorsey, who was the longtime director of equity research at Morningstar, where he specialized in economic moats: sources of sustained competitive advantage that allow a few companies to deliver huge returns over time." [audio]

Investing in floppy disks
08/28/17   Value Investing
"Two years ago, we were trading at 10 times revenue. ... At 10 times revenue, to give you a 10-year payback, I have to pay you 100 per cent of revenues for 10 straight years in dividends ... That assumes that I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes that I pay no taxes, which is very hard. ... And that assumes that with zero R&D for the next 10 years, I can maintain the current revenue rate. ... Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?"

The August of our discontent
08/07/17   Value Investing
"This month is the ten-year anniversary of the "quant crisis" or "quant quake" - that one week period in August 2007 when quantitative equity strategies like factor investing and statistical arbitrage suffered very large losses and then, in the next few weeks, made an almost full recovery. Given the current popularity of factor investing it seems a good time to review what happened that summer and discuss its relevance for today."

Robert Robotti Interview
07/30/17   Value Investing
"Robert Robotti on the role of active management in the modern world" [audio]

Compound your face off
07/30/17   Value Investing
"Lots of you will already be familiar with Wes Gray, and those of you who are not are in for a treat. Wes is the founder of Alpha Architect, a firm which manages quantitative equity strategies for clients using factors like value and momentum. He also advocates for a more concentrated, pure approach to factor investing, which listeners know is music to my ears." [audio]

Valuation showdown
07/23/17   Value Investing
"It appears more fruitful to look at companies in the context of their total enterprise values, as opposed to their market capitalizations. Again, this resonates. To understand whether a company's shares are mispriced from the perspective of a whole owner, it is crucial to understand first what it would take to own the company outright."

Thomas Russo interview
07/16/17   Value Investing
"In a rare interview, great value investor Tom Russo explains why the ability to say no and the capacity to suffer are key to investment success." [video]

Canadian Net Net
07/16/17   Value Investing
"With the S&P/TSX composite index close to its record high, it is difficult to argue that the overall stock market is beset with pessimism, but in my portfolio, one sector is deep under water and out of favour: oil-service stocks. Here, it is easy to find stocks trading at half of book value, which have proven that they can survive with oil at $30 (U.S.) a barrel and with a balance sheet strong enough that the bank has not called the loan. For a risk-tolerant investor, this is a fertile research universe." [$]

PB blind spot
06/26/17   Value Investing
"A possible reason for the limited efficacy of price-to-book is because of the increase in shareholder transactions, primarily through the increase in share repurchases."

The Canadian Acquirer's Multiple
06/26/17   Value Investing
"Over the full eighteen-and-one-half year period, the screen generated a total return of 2,536 percent, or a compound growth rate (CAGR) of 19.1 percent per year. This compared favorably with the S&P/TSX Composite TR, which returned a cumulative total of 232 percent, or 4.7 percent compound."

Whiplash: Value vs. Growth
06/18/17   Value Investing
"With mean reversion, investor behavior, and interest rates all lining up on the same side, things are indeed starting to look up for value."

Graham and Doddsville Spring 2017
05/14/17   Value Investing
"In this issue, we were fortunate to speak with three investors who provide a range of perspectives and investment approaches. All three apply variations of value investing and fundamental research to find overlooked opportunities. These investments could be stable businesses in turbulent geographies, misunderstood businesses engrossed in controversy, or compounders that are hiding in plain sight."

Alt-facts about formulaic value investing
04/23/17   Value Investing
"We believe that even the simplest systematic value strategy will likely earn higher expected returns than the broader market over the next 50 years, but it may not be 'healthy' and it will surely be volatile as heck. We also believe that more sophisticated systematic value strategies will likely earn a marginal premium over the simplest value strategies over the next 50 years. But let's not fool ourselves, the bulk of the excess expected returns that may be realized by these 'sophisticated' value strategies will be driven by the fact that these portfolios will own cheap companies the world hates, not from the 'sophistication.'"

Joel Greenblatt talks at Google
04/09/17   Value Investing
"Since 1996, he has been a professor on the adjunct faculty of Columbia Business School where he teaches Value and Special Situation Investing. He is the author of three books, You Can Be A Stock Market Genius (1997), The Little Book That Beats The Market (2005), and The Big Secret for the Small Investor (2011)." [video]

Jim O'Shaughnessy talks at Google
04/09/17   Value Investing
"Investors who do not have the following traits and emotional quality should index their portfolios. I find they are the majority of investors today." [video]

Factor timing is hard
03/19/17   Value Investing
"Adding value from market timing is very hard even though the aggregate market price (e.g., the CAPE) matters and varies a lot over time. In our latest paper, we again show that factor timing is likely even harder than market timing."

Chuck Akre talks at Google
03/12/17   Value Investing
"Chuck talks about compounders at Google."

Klarman's letter
02/12/17   Value Investing
"President Trump may be able to temporarily hold off the sweep of automation and globalization by cajoling companies to keep jobs at home, but bolstering inefficient and uncompetitive enterprises is likely to only temporarily stave off market forces"

Factor investing art and science
02/05/17   Value Investing
"My conclusion is that we are still a long way away from understanding the so-called 'science' of investing. We're probably better off understanding the insanity of investors and the incentives of delegated asset managers if we want to understand the science of investing, but this is controversial among many financial economists."

Charles de Vaulx interview
01/22/17   Value Investing
"Veteran value fund manager, IVA Advisers' Charles de Vaulx explains why he has nearly 40% of his portfolios in cash." [video]

And that's OK
01/22/17   Value Investing
"I don't know a lot of things when it comes to investing. I don't know exactly how or when the current market cycle ends. I don't know when valuations will matter again. I don't know when central banks lose control and free markets return. I don't know the next time I'll be fully invested. And I certainly don't know the near-term direction of stock prices. But I get asked about these things frequently. I wish I knew, but I don't."

Cash cows of the Dow
01/15/17   Value Investing
"The Cash Cows, despite having the lowest dividend yield, have by far the largest buyback yield resulting in a total shareholder yield that is nearly double that of the Dogs and about a third higher than the Dow."

Absolute vs. relative value
01/15/17   Value Investing
"In keeping with Montier's absolute value philosophy, we investigated several dynamic allocation strategies based on reducing or eliminating exposure to markets as they get more or less expensive, using the real earnings yield as our yardstick. In every case we tested the absolute value based approach delivered a higher Sharpe ratio, and a much higher ratio of returns to our approximation of Montier's measure of risk - maximum drawdowns."

CAPE works
12/04/16   Value Investing
"CAPE's value is not in predicting what a single asset class or market is going to do all by itself in a vacuum. But as we've intended to illustrate in this paper, when you use CAPE in the broader, logical way, the data seems to prove it's a wonderful timing tool."

Why moats are essential
11/20/16   Value Investing
"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors."

Is value investing broken?
11/20/16   Value Investing
"Here are the times Ben Graham invested in: the 1910s through the 1950s. He invested during Two World Wars, the start of the Cold War, the atomic bombings of Nagasaki and Hiroshima by the U.S. and then the testing of nuclear weapons by other countries, The Great Depression, a big explosion (reportedly a terrorist bombing) on Wall Street, and the longest shut down of trading in Wall Street history that I can remember at least (right as World War One started). People talk about political risk today. Political risk in Ben Graham's time meant Marxists and Fascists. Investors saw hyperinflation in Germany after the war and then they saw deflation after the 1929 crash. These were not simple times. If you go back and read the newspapers from the time - you can see how not simple they were."

Bill Miller interview
11/06/16   Value Investing
"In a wide-ranging discussion, Miller talks about everything from his stock selection process, his infamous streak, and what he got wrong during the financial crisis."

Investors must be contrarians to outperform
11/06/16   Value Investing
"If you are not getting more humble over time, you have a flawed system."

Sarah Ketterer on value
10/23/16   Value Investing
"Highly-rated global investor, Sarah Ketterer, Portfolio Manager of Causeway International Value Fund explains why there is still plenty of value to be found in overseas markets." [video]

Berkowitz interview
10/02/16   Value Investing
"An exclusive interview with a deep value investor whose outstanding long term track record has been seriously tested in recent years. Why Fairholme Fund's Bruce Berkowitz says there is light at the end of the tunnel." [video]

12 lessons from Howard Marks
09/25/16   Value Investing
"To convey my points in this post I decided to take an investing style that many would consider to be very different from value investing and show that they are in fact based on the same principles applied in different ways to different types of assets. That other investing system I will discuss here is venture capital."

The discipline of value investing
09/17/16   Value Investing
"The key to implementing the strategy successfully is separating your investment process from short-term results: to have discipline."

Has P/B become a bad measure of value?
08/06/16   Value Investing
"A possible reason for the limited effectiveness of P/B is because of the increase in shareholder transactions, primarily through the increase in share repurchases."

MiB: Wes Gray
06/25/16   Value Investing
"Gray combined his military and mathematical backgrounds as a quant running Alpha Architect. His focus on momentum and value have yielded excellent results."

Timing buyback yield
06/25/16   Value Investing
"the market's overall buyback yield is not something on which you should base any investing decisions."

Concentrated value
06/16/16   Value Investing
"The best returns came from a 5 stock portfolio. The best Sharpe ratio came from the 15 stock version. Both return and Sharpe degrade after 15 stocks."

Norway's Warren Buffett
06/11/16   Value Investing
"Kristian Siem is considered by many to be the Warren Buffett of Norway. Since 1987 Siem has compounded his money at a rate of about 30% annualized, increasing his worth from about $5 million in 1987 to around $2 billion by 2014."

Chuck Akre: compounding machine
05/14/16   Value Investing
"Great Investor Chuck Akre explains how he finds "compounding machines" -- companies that produce high rates of returns for shareholders. Chuck says these companies are few and far between, but once he finds them, he holds on to them." [video]

Chris Davis: compounding machines
05/14/16   Value Investing
"Third generation value investor Chris Davis discusses why unpopular financial stocks can actually be compounding machines." [video]

The cost of dividends
05/08/16   Value Investing
"It turns out that the simple value strategy (which included avoiding high yield stocks) actually produced higher returns than the dividend strategy - not just similar returns. In other words, before we even get to the tax benefits, 'value' had already trumped 'dividends.'"

Shrinkage vs. growth
05/08/16   Value Investing
"The most interesting story in the history of capital allocation was the rapid growth and then steady shrinking of Teledyne, a conglomerate formed by Henry Singleton in 1960."

Seth Glickenhaus dies at 102
04/24/16   Value Investing
"Seth Glickenhaus, a bond trader turned money manager whose studies of law and medicine failed to lure him away from Wall Street, his professional home for more than eight decades, has died. He was 102."

Chou Funds letter
04/10/16   Value Investing
"It is hard for us to believe that RFP is trading as low as $4 per share."

Alpha or assets
04/10/16   Value Investing
"With fees lower across the board, scale becomes a more important consideration for asset managers when deciding what strategies to offer the investing public. When fees fall, assets need to rise. For assets to rise across a business, the strategies offered need to be able to accommodate more invested money."

Is value coming back?
03/20/16   Value Investing
"Lots of money is flowing out of value strategies, and the stocks are cheap. I've lost several clients, and may lose some more. Oddly, it is the losing of clients that gives me the most hope. You need people to leave a strategy when it is down and out for the strategy to bottom."

Valuable losses
02/28/16   Value Investing
"A rare interview with Great Value Investor Wally Weitz on finding opportunities where others are seeing losses."

A gambler or the house
02/21/16   Value Investing
"Just like the house in a casino, value investors sometimes get destroyed. Several very high profile investors with great long term track records felt that pain in 2015. Real value stocks (and strategies) hurt to buy and sometimes really hurt to hold."

Kleinschmidt interview
02/07/16   Value Investing
"An exclusive interview with Tocqueville Fund's long-time portfolio manager Robert Kleinschmidt. The contrarian value investor explains why commodities are key to the market and what they are telling him now."

Meb Faber interview
01/31/16   Value Investing
"On today's show, co-founder and CIO of Cambria Investment Fund, Meb Faber, discusses a global value investing approach with Preston and Stig. Although the US stock market has recently dropped significantly at the start of 2016, Meb suggests the market might still have more to fall. Meb also reveals how he is invested, and which returns he expects for US and emerging stock markets in the years to come."

Dorfman's robot
01/22/16   Value Investing
"Are you better off with a robot? Dorfman Value Investment's John Dorfman discusses why his robot list performs so well" [video]

The robot portfolio
01/22/16   Value Investing
"The Robot boasts a compound average annual return of 15.58 percent, compared to 4.17 percent for the S&P 500. Figures include reinvested dividends. The cumulative return for the Robot stocks has been 1,119 percent, versus 123 percent for the index."

Mohnish Pabrai lecture
01/16/16   Value Investing
"Mohnish Pabrai talks to students at Boston College"

3 investors meet in a bar
01/02/16   Value Investing
"All three had the exact same investing methodology: buy the cheapest 10% of the market every year, and hold for a year. Each of the three also selected from the exact same list of U.S. stocks. The only difference was how they measured value. Bill used book value, Ernie used earnings, and Sam used sales."

Factors that launched 1,000 ETFs
12/26/15   Value Investing
"Across the five factors, the average long/short spread was 10.3%/year for the entire period (1964-2015), 10.6% for the period of rising rates (1964-1981), 11.8% for the period of falling rates (1981-2008) and 2.3% for the ZIRP period. Clearly, things have tailed off."

William Smead interview
12/18/15   Value Investing
"Smead Value Investor fund.s William Smead explains why his concentrated, high quality, low turnover approach has delivered top investment performance." [video]

International enterprise multiple
12/13/15   Value Investing
"The paper, published in the Journal of Financial and Quantitative Analysis, confirms the U.S. evidence that cheap enterprise multiple stock outperform expensive enterprise multiple stocks by about 1 percent per month. And it works just as well whether the markets are developed or emerging, and in stocks small and large."

Consider net-net stocks
12/13/15   Value Investing
"These are companies trading below liquidation value per share, which in some cases would be the best outcome. Needless to say, they are almost always microcap, thinly traded and facing severe headwinds."

Patrick O'Shaughnessy interview
12/13/15   Value Investing
"In this episode Preston and Stig talk to Patrick O'Shaughnessy about what he does best: 'Demystifying stocks with hard core facts!' Patrick O'Shaughnessy is a lead authority in the new generation of quant value investors, and he runs the amazing blog, The Investor's Field Guide. Co-hosting this week's show is bestselling author Toby Carlisle, who blogs at"

T. Boone Pickens talks with Carl Icahn
12/05/15   Value Investing
"T. Boone Pickens sat down with legendary businessman and activist shareholder, Carl Icahn. The two men discussed energy security, including the effect of Saudi oil exports on America's production, Carl's views on the markets and much more."

Carl Icahn on activist investing
11/07/15   Value Investing
Carl Icahn talks about his approach at the 2015 DealBook conference. [video]

Value Investing is difficult
11/07/15   Value Investing
"Even with a sound approach to equity investing, you should expect multi-year periods where crazy things happen."

James O'Shaughnessy interview
11/07/15   Value Investing
"How to be humble about stock investing, and how you are likely to beat the stock market by taken yourself out of the equation" [audio]

Fall 2015 Graham & Doddsville
10/18/15   Value Investing
"The average investor tends to invest in the strongest past returns and get the worst forward returns."

Buybacks and debt
10/10/15   Value Investing
"The number one question I get about the shareholder yield factor is whether or not this debt-funding-buybacks is a big issue and something that should scare us. Asked differently, are companies that are taking on more debt to buy back shares ticking time bombs?"

Thomas Russo on global value
10/10/15   Value Investing
"I consider myself to be a farmer - not a hunter. And I think most people on Wall Street are hunters. They like to fell big beasts and I'm very comfortable planting a few rows and just tending to them carefully." [video]

Building optimal value portfolios
10/03/15   Value Investing
"The authors also found that, due to a diversification benefit, a 50/50 blend of B/P and E/P outperformed both single-metric strategies during most 10-year periods between 1973 and 2013. The blended strategy had the highest annualized return: 14.21 percent per year over the period January 1973 through December 2013, followed by E/P with 13.48 percent per year and B/P with 12.79 percent per year."

How to beat activist investors
09/27/15   Value Investing
"One problem with riding the coattails of activists is that their stocks rally sharply the second it becomes known that they have big positions in companies. So you miss out on a lot of their gains."

Charlie Dreifus interview
09/25/15   Value Investing
"veteran contrarian investor Charlie Dreifus explains why he is not worried about recent stock market turbulence and where he is still finding high quality bargains."

The prejudices of Mr. Market
09/12/15   Value Investing
"Sanjay will show how the stock market is deeply prejudiced in pricing moated businesses and that exploiting those prejudices - especially when they combine - has helped him in his investing process." [video]

Can it work if everyone knows about it?
09/05/15   Value Investing
"We're going to argue that certain well-known classic strategies that have worked over the long term will continue to work going forward, though perhaps not at the same level and with different risks than in the past."

The capacity to suffer
09/05/15   Value Investing
"Tom Russo: The capacity to suffer doesn't mean you're supposed to suffer" [video]

Chou Semi-Annual 2015
09/02/15   Value Investing
"The current conditions make me feel that investors are being set up for heartbreaking disappointment, especially for the unwary."

A value asset allocation strategy
07/25/15   Value Investing
"After enduring years of frustration trying to identify a valuation-based asset allocation technique.that actually worked.I think the team at Gestaltu is on to an interesting concept. By simply looking at real spreads between equity valuations and realized inflation (high spreads are good for equity; low spreads are bad for equity), one can devise a timing rule that captures most of the upside, but protects on the downside. Of course, this is all historical data and could very well be an exercise in data-mining. That said, the concept of buying equity assets when they have much higher yields than current inflation, is intuitively appealing."

Why people repeat financial errors
07/25/15   Value Investing
"This week on our Masters in Business radio podcast, we speak with Howard Marks, co-chairman of Oaktree Capital Group. In our discussion, Marks explains what 'second-level thinking' means for investors and why so many people make the same financial errors."

High conviction buybacks
07/18/15   Value Investing
"the high conviction companies have gone on to ourperform the average large stock by about 3.3% in the subsequent year, while the low conviction firms haven't really delivered much excess return at all (just 0.5%, on average)."

O-score and distress risk
07/12/15   Value Investing
"Value investing always wins, even after controlling for distress. And value investing really wins among the most distressed firms. Oddly enough, expensive firms that are distressed earn 14.44% less than cheap firms that are distressed."

The evolution of a value investor
07/04/15   Value Investing
"Tom Gayner is the CIO of Markel Corp, where he manages the company's investment portfolio. He talks about his journey as an individual and value investor."

Dividend stocks and value investing
06/20/15   Value Investing
"The results suggest that a sort on a simple value investing measure works well at sorting dividend stocks."

Buyback extravaganza
06/20/15   Value Investing
"Buybacks may not be well timed in aggregate, but they have been timed well (at least, timed at cheaper relative prices) by companies with the highest conviction buyback programs. These can get lost in the shuffle because, on average, the cash spent on buybacks by these high conviction firms represent 22% of the total cash being spend on buybacks (gross)."

Lessons from market extremes
06/13/15   Value Investing
"Bottom line: value wins again for consistency the fact that the median value stock has outperformed nicely. Glamour has the more fun and exciting outliers, but the median glamour stock gets killed and even the best ones are extremely volatile."

Woe betide the value investor
06/06/15   Value Investing
"Alas, the fund manager's profession is abysmally depressing. You are regularly reminded by academic research that, on average, you destroy value, net of fees; a monkey randomly selecting stocks, or a cap-weighted index, outperforms you. (Sort of makes you question the value of your MBA degree and CFA designation.) Nor are the select few who have delivered long-term outperformance spared. New evidence suggests that your clients' decisions undo your work, so that, in the end, your contribution to their financial well-being is still quite negative. Your time-weighted returns may be superior, but the dollar-weighted, net-of-fee returns the clients actually receive are nonetheless adverse."

History of price-to-sales
05/31/15   Value Investing
"Price-to-sales is a very simple ratio. Arguably, it is the least nuanced and therefore least manipulated valuation measure. A sale, for the most part, is a sale. Unlike earnings, book value, and other fundamental measures which are sometimes more opinion than fact, sales is a more straightforward number."

Tobias Carlisle talks at Harvard
05/31/15   Value Investing
"Tobias Carlisle speaking to Michael Parzen's Business Statistics Class, Harvard College, April 21, 2015." [video]

Using the price-to-book ratio
05/27/15   Value Investing
"One key thing to note about price-to-book: it has tended to push investors towards financials, utilities, materials and industrials, and push them away from health care, technology, and consumer staples."

The original value factor
05/23/15   Value Investing
"Book value (or 'common equity' calculated as total assets minus total liabilities) has some advantages. Unlike earnings, it is fairly stable through time and almost always a positive number. This makes calculation easy and leads to lower turnover in a live value portfolio based on price-to-book. Many famous style indexes and money managers use price-to-book to define value."

Russo on long-term value
05/23/15   Value Investing
"Tom Russo invests in iconic brand name companies for the long term. Which global businesses is he most enthused about now?"

The O'Doul's of value investing
05/15/15   Value Investing
"I don't really get why anyone would prefer fundamental index to more concentrated, pure-play bets on value or shareholder yield. Let's see why."

Combining value and momentum 2
05/09/15   Value Investing
"We find that sorting stocks on value and then momentum has been a historically successful strategy. However, sorting stocks on value and then quality, which is inline with a fundamental value philosophy, works just as well, if not better. We hypothesize that the .momentum. effect identified within the cheap stocks bucket, is really a proxy for strong fundamentals and positive operational momentum among the cheapest, highest quality value stocks. Our preference.based on empirical and philosophical to go with a more .pure. value philosophy that focuses on buying the cheapest, highest quality value stocks, as opposed to a muddled value approach that buys the cheapest, highest momentum value stocks."

Methods to improve the Piotroski F-Score
05/04/15   Value Investing
"We have identified ways to improve the baseline Piotroski F-Score and enhance value investing strategies. The final product is the FS-Score, which incorporates net-share repurchases and free-cash-flow metrics and arranges the metrics to align closer with traditional value-investing principles."

Frank Martin speaks in Toronto
04/27/15   Value Investing
"Frank Martin talks about CAPE"

Russell Napier speaks in Toronto
04/27/15   Value Investing
"Mr. Napier talks about equity valuation, inflation, deflation and mean reversion"

Ben Graham Centre conference slides
04/19/15   Value Investing
The slides used at least week's value investing conference are now available.

Take heart, value investors
04/17/15   Value Investing
"These are tough times for bargain-hunting investors. Ever since the financial crisis, most value-oriented portfolios of stocks have lagged the broad market, and for fairly obvious reasons. When central banks are injecting massive amounts of money into the economy, and holding interest rates at record lows, investors have no great reason to be choosy about which companies to buy. The entire market is headed up."

Joel Greenblatt speaks with Howard Marks
04/12/15   Value Investing
"Joel Greenblatt Managing Partner and Co-CIO of Gotham Asset Management speaks with Howard Marks Chairman, Oaktree Capital Management L.P." [video]

How to combine value and momentum
04/04/15   Value Investing
"The evidence suggests that we keep highly active exposures to value and momentum in their purest forms (assuming we are doing high-conviction non-watered down versions of the anomalies). Blending the strategy dilutes the benefit of value and momentum portfolios."

Howard Marks talks at Google
04/04/15   Value Investing
Howard Marks talks about investing with people at Google. [video]

The power of share repurchases
04/04/15   Value Investing
"Each incremental refinement to investing in the U.S. large cap stocks has led to significant improvement in returns. After controlling for nefarious or misguided motivations, a strategy based on both dividends and buybacks has delivered outsized returns since 1982. Further qualifying the strategy by insisting on attractive valuations and high quality earnings creates a strategy that has been formidable in what arguably should be the most efficient area of the global stock market."

Mohnish Pabrai and Guy Spier
03/28/15   Value Investing
"Mohnish Pabrai and Guy Spier in conversation with Saurabh Madaan at Google" [video]

Third Avenue Funds letter
03/14/15   Value Investing
"In analyzing junior securities of companies with perpetual lives, especially the common stocks of corporations, markets tend to be quite inefficient in measuring long-term underlying value."

Fairfax 2014 letter
03/14/15   Value Investing
"The CAPE (Cyclically Adjusted Price Earnings) Ratio for the S&P500 is currently at 28 times. It has been higher only twice before; both times ended badly. The first time was in 1929 and the second time during the boom of 1999 to 2002. The rising U.S. dollar (with over 40% of the average S&P500 companies' earnings coming from abroad) and the current record after-tax profit margins, combined with deflation, could result in significant declines in the earnings of the S&P500 companies - just as the index hits record highs. We say 'caveat emptor', and continue to be very cautious about our equity positions. I have reminded you many times in past Annual Reports of the warning from the distant past from our mentor Ben Graham: 'Only 1 in 100 survived the 1929 - 1932 debacle if one was not bearish in 1925'."

Sequoia Fund 2014 report
03/14/15   Value Investing
"One reason we think the trend could have legs is that markets continue to grow more efficient. Our colleague Greg Alexander likes to say 'the Index is a lot better than it used to be.' U.S. corporate managements are generally competent and focused on creating shareholder value. There are not a lot of mutts left in the kennel, so to speak, so winning the dog show is harder."

Tobias Carlisle interview
03/07/15   Value Investing
"I had a lot of fun recording an interview with Stig Brodersen and Preston Pysh of The Investors Podcast on one of my favorite subjects, deep value investing."

Piotroski Score Backtest Part 2
02/14/15   Value Investing
"As you can see in the bar chart above, average excess returns are negative for F-Scores below 3. The average excess returns then climb up from just over zero for F-Score 3 and then climb steadily to about 5% for F-Score 8. Then the average excess returns jump to 9% for F-Score 9. There appears to be something a bit special for getting a perfect score. However, we have to be careful not to draw too many conclusions about F-Score 9, since the average portfolio size for Piotroski Score 9 is only 34 positions."

Concentrated P/B does badly
02/14/15   Value Investing
"Book to price is a bad value factor. It is a decent stock selection factor overall, but relative to the other ways of measuring value (earnings to price, cash flow to price, EBITDA/EV, etc) it is sub par."

Eveillard: Legendary Value Investor
02/07/15   Value Investing
"An exclusive interview with legendary value investor Jean-Marie Eveillard" [video]

Piotroski F-Score backtest
02/07/15   Value Investing
"This backtest for Piotroski F-Score reveals that the first quintile underperforms the S&P 500 Equal Weight Index benchmark. These companies typically weak balance sheets and weak earnings performance so it is not surprising that stock returns for these companies would underperform. The second through fifth quintiles have higher than average annual excess returns than each of the previous quintiles. I like that there was a consistent linear trend upwards from the 1st to 5th quintiles. The Piotroski F-Score does appear to be a powerful fundamental predictor of 1-year stock performance."

Buy the most despised company
01/18/15   Value Investing
"Between April 1983 and December 2007, the despised portfolio outperformed the admired one by more than 2 percentage points per year, on average. In addition, the professors found that increases in admiration were, on average, followed by lower returns."

Pat Dorsey Lecture
01/18/15   Value Investing
"What does it mean for a company to have a moat? What are the key drivers to valuation? Pat Dorsey will use examples to shed light on these, and more questions." [video]

Tobias Carlisle and Deep Value
12/27/14   Value Investing
"The evidence reveals an axiomatic truth about investing: Investors aren't rewarded for picking winners; they're rewarded for uncovering mis-pricing."

Patient investing
12/13/14   Value Investing
"First Eagle Global Fund's Matthew McLennan. First Eagle is known for its value-oriented, margin of safety approach and making preservation of capital its first investment goal. ... McLennan explains why he is currently finding markets around the world expensive, and why 'patience' is his best investment idea." [video]

Digging manager graveyards
12/12/14   Value Investing
"Taking on tracking error is a great way to get fired as an asset manager. As an individual, it is a great way to break your confidence and sell your hated value stocks."

The dangers of reacting to short-term volatility
12/06/14   Value Investing
"It is true that the volatility of terminal wealth across all holding periods is found to be higher for stocks than bonds in every market examined and, thus, stocks are riskier when risk is measured by volatility. But interestingly, the higher volatility of terminal wealth from stocks is mostly on the upside. So, stocks have both higher upside and more limited downside than bonds."

Value Investing by Bruce
11/29/14   Value Investing
"Bruce Greenwald's presentation from the Welcome Event for the 12th International Post Keynesian Conference." [video]

Price-to-book value ratios
11/23/14   Value Investing
"...analyzing the results for stocks based on their price-to-book value ratios underlines and highlights why we should always seek access to the longest datasets we can find, as they offer much better indications of what investors should expect from various types of investing."

Joel Greenblatt on WealthTrack
11/23/14   Value Investing
"Joel Greenblatt of the Gotham Funds will explain his big change in portfolio strategy, from a very concentrated approach to broad diversification."

Joe Rosenfield's remarkable story
11/15/14   Value Investing
"By popular demand, I'm posting here the PDFs of an article I wrote years ago: 'The Best Investor You've Never Heard Of,' about Joe Rosenfield, the uncommonly courageous thinker who was for many years the chairman of the investment committee of Grinnell College - and a hero to many other great investors, including his friend and admirer Warren Buffett."

Concentrated value
11/08/14   Value Investing
"To take advantage of value investing, you need a smaller portfolio than you may think. I was curious to see what different levels of portfolio concentration would have produced in a value-only portfolio over the past 50 years, and report the results here."

Graham and Doddsville: Fall 2014
11/01/14   Value Investing
Featuring interviews with Wally Weitz and Guy Gottfried.

Value investors see few bargains
10/26/14   Value Investing
"Small-cap valuations are still quite asinine"

Low volatility and value
10/19/14   Value Investing
"A large part of the performance associated with low volatility stocks is clearly being driven by exposures to value; however, there does appear to be some marginal benefit to investing in low volatility stocks."

Is value investing a hoax?
10/04/14   Value Investing
"It was a wide-ranging conversation canvassing some interesting ideas: Net nets, the Acquirer's Multiple, and the validity of value investing"

The large-stock value premium
09/19/14   Value Investing
"Recently, we have seen a rise in the level of discussion about whether there is a significant value premium in large-cap stocks. The value premium is the tendency of stocks with low prices relative to measures of their value to outperform stocks with high relative prices. Since large-cap stocks make up about 90 percent of the total global market capitalization, this is an important issue."

A few cheap stocks
09/13/14   Value Investing
"The reason that value works is that it is a proxy for expectations. Cheap valuations = lower expectations for the future--but these bleak forecasts often turn out to be too grim. This alternative way of looking at value can help investors identify stocks that are both cheap today, but also have had falling expectations over time. To paraphrase Templeton, the key isn't to find stocks for whom the outlook is good, but to find stocks for whom the outlook it is miserable."

Barry Ritholtz interviews James O'Shaugnessy
08/30/14   Value Investing
"Barry Ritholtz interviews James O'Shaughnessy, the chief executive officer of O'Shaughnessy Asset Management. They discuss the strategies that work on Wall Street." [Audio]

Tobias Carlisle at Deep Value Summit 2013
08/29/14   Value Investing
"Tobias Carlisle talks about KLIC and why he bought it." [Video]

Tobias Carlisle interview
08/29/14   Value Investing
"Tobias Carlisle talks about his book Deep Value." [Audio]

108-year-old investor
08/24/14   Value Investing
"Three days a week, Irving Kahn takes a taxi from his flat in Manhattan for the short ride to the offices of his investment firm, Kahn Brothers. Nothing surprising about that, you might think. But Mr Kahn is 108 years old."

The moneyball of quality investing
08/24/14   Value Investing
"Factor investing has rightfully gained adherents among investors seeking superior risk-adjusted returns. Our research reveals that quality is not a factor that reliably commands a premium in its own right. Nonetheless, value investing conditioned upon certain indicators of company quality is a promising strategy."

Valuing community banks
07/25/14   Value Investing
"There isn't one way to value a community bank, but multiple ways. Each way could yield a different value, but ultimate all methods of valuation should somewhat agree on a potential value."

Value combo
06/29/14   Value Investing
"The attraction of the combo is that it delivers returns comparable to the very best metric at any point in time."

Price to sales ratio backtest
06/07/14   Value Investing
"This backtest of the Price/Sales ratio reveals that the first quintile outperforms the S&P 500 Equal Weight Index benchmark. The second through fifth quintiles have lower average annual excess returns than each of the previous quintiles and the overall trend in excess returns is a linear decrease as the P/S ratio increases."

Price to free cash flow ratio backtest
06/07/14   Value Investing
"This backtest of the P/FCF ratio reveals that the first quintile outperforms the S&P 500 Equal Weight Index benchmark. The second through fifth quintiles have lower average annual excess returns than each of the previous quintiles and the overall trend in excess returns is a linear decrease as the P/FCF ratio increases."

Value vs the market since 2008
05/25/14   Value Investing
"Value investors are right. The period since 2008 has been more difficult for value strategies than it was in the early 2000s. But simple value strategies have still outperformed over the full period, and by a wide margin. This is despite the fact that, in many instances, the value decile often underperforms the market, and in some cases, more than half the time."

Chou's 2013 letter
03/30/14   Value Investing
"We believe that the market is currently fairly valued and we sincerely doubt the overall returns from equities in general over the next five to 10 years will be compelling. On the contrary, we believe the returns may be far more modest than those hoped for by investors. Not only are the P/E ratios and price-to-book values still high and dividend yields low relative to historic valuations, but the number of companies that are underpriced is at an all-time low. In light of this scenario, and with its obvious lack of bargains, we would not hesitate to sell our investments and be 100% or 50% cash -- or whatever the number may be."

David Winters interview
03/30/14   Value Investing
"Wintergreen Fund's David Winters, a value investor who describes himself as the opposite of an index hugger, has more than 60% of his portfolio invested in companies based overseas and has recently taken a stand against Coca Cola management and Warren Buffett"

Investment principles and habits
02/16/14   Value Investing
"David Kostin, Goldman Sachs' chief U.S. equity strategist, explained that investor demand for 'value' has been so pervasive that low-valuation stocks had outperformed higher valuation peers by 12 percent in 2013. As a result, the distribution of S&P 500 P/E multiples was now its tightest in at least 25 years, implying less differentiation of companies based on valuation."

Mohnish Pabrai's Boston College talk
01/12/14   Value Investing
Set aside some time to watch Mr. Pabrai's presentation.

Casting a wide net for deep value
01/05/14   Value Investing
"In 1651, Thomas Hobbes described the life of mankind as "nasty, brutish and short." He could also have been describing the list of Canadian stocks that typically pass the Ben Graham net-net working capital screen."

Words of wisdom to value investors
12/29/13   Value Investing
"One thing that has always pleasantly surprised me on my travels is how generous so many value investors are with their time and advice, no matter how demanding their positions and other commitments are. I've come to believe that this willingness to share with one another, the attitude of 'there are no secrets,' and the modesty of talking about one's successes as well as failures, is what distinguishes our shared global value investing community."

Why a cheap stock can be a bad buy
12/15/13   Value Investing
"When you can buy merchandise at 40 per cent off the last ticketed price in the weeks before Christmas, you know that the current retail environment is grim. But when even the liquidators are closing up shop, maybe the situation is worse than we realize."

Key new findings on stock selection
12/02/13   Value Investing
"Better and more consistent results are achieved when a composite of individual factors is used. A value composite helps avoid value traps and can show some seemingly pricey stocks to be attractively valued. Financial strength and earnings quality composites are better used to identify stocks to avoid."

Treasure hunters of the financial crisis
11/10/13   Value Investing
"Five years ago, the global financial system was falling apart. Lehman Brothers had imploded. Banks had stopped lending. Foreclosure signs were as common as weeds on the front lawns of suburban homes. And Bruce A. Karsh saw the buying opportunity of a lifetime."

Prem Watsa the Canadian Warren Buffett
11/03/13   Value Investing
"Fairfax, which has a portfolio worth US$24.1 billion, has gained 31% this year, compared with a 7.8% rise in the Standard & Poor's/TSX Composite Index. The investment firm has returned 13% annually over the past 20 years, mirroring the rise of Warren Buffett's Berkshire Hathaway Inc., according to data compiled by Bloomberg."

Cliff Asness
10/27/13   Value Investing
"Cliff Asness interview on WealthTrack"

Market underestimates BlackBerry
09/29/13   Value Investing
"'The market's very emotional,' he adds. 'You'll find huge optimism when everything's going well, huge pessimism when things are not working out as well. And what we say is the truth is in between.'"

It doesn't work all the time
09/22/13   Value Investing
"There are valid theories on investing, and they work on average. If you pursue them consistently, you will do well. If you pursue them after failure, you can do better still."

Francis Chou seminar
09/05/13   Value Investing
"Francis talks value at the Ivey business school"

Last Leucadia letter
06/25/13   Value Investing
"Forty-three years ago, the two of us met at Harvard Business School and thirty-five years ago was the beginning of a remarkable partnership - the results of which are tabulated on the opposite page. The end of 2012 marks the end of this partnership and the last letter from the two of us."

The importance of expectations
06/16/13   Value Investing
"I've come to appreciate that investments always take much longer than I expected to work out. This is why investors seek out catalysts, it's an effort to reduce patience. I'd rather work on my patience skills, because there are a lot more investments without catalysts out there, than with them."

Value around the world
06/16/13   Value Investing
"Over the last decades the value premium has well been documented for various time spans and countries. It is proven to be a consistent asset pricing anomaly. This study presents the largest international study on portfolio returns formed according to the book-to-market ratio and examines how cultural differences affect the magnitude of value returns. The cultural differences are measured in two dimensions: patience and risk aversion based on the data collected by the International Test on Risk Attitudes (INTRA). In accordance with a consumption based Gordon model we find that risk aversion is positively and patience negatively related to the magnitude of value profits. Similar results hold for the average stock volatility. Although patience is positively related with the degree of economic development, its relation to value returns does not disappear after controlling for general economic and financial development measures. Furthermore, we find that the value premiums are also positively associated with the country price earnings ratio and negatively related to firm size."

Chou's 2012 letter
03/30/13   Value Investing
"In general, we are not that bullish on the stock market. Aside from a couple of industries like the financial institutions in the U.S. and companies in the retail sector, we are not that comfortable with the prices of many stocks."

Fishing for value
03/30/13   Value Investing
"There are generally three scenarios under which they buy into a company - it's ignored by Wall Street, is misunderstood by investors, or has suffered from panic selling."

The best stock-picker
03/30/13   Value Investing
"By buying companies with safe, high dividend yields, Norman assured himself of getting only companies that had solid financial characteristics (after all, they couldn't have been paying dividends for many years without a good underlying business model and strong cash flow), at prices that were usually - in hindsight - ridiculously cheap, because Norman generally bought them during a hysteria that was causing Mr. Market to offer that particular stock at a particularly attractive price."

Mohnish Pabrai interview
02/24/13   Value Investing
"I don't invest in technology stocks because I understand it. Basically, Buffett would say that he doesn't invest in tech businesses because they are subject to change. Industries with rapid change are the enemy of the investor. Tech businesses, particularly biotech, is a problem from that point of view. All industries work with change but you should ideally be investing in businesses with a low rate of change, not a high rate of change."

Tough times for classic value investors
02/24/13   Value Investing
"While the U.S. equity market has performed exceptionally well since its bottom in March 2009, Warren Buffett's Berkshire Hathaway has trailed the index by nearly 6%. Buffett is among a number of prominent classic-value investors who have fared poorly over this period. Over long time horizons, value investing has consistently outperformed growth strategies and the broad market index. So what is causing this recent phenomenon?"

Francis Chou on value
02/03/13   Value Investing
"What keeps you awake at night? I worry if my valuations are wrong. If they are wrong, then you don't make money. I am looking for something that I believe is worth 100 cents, but which I can buy for 50 or 60 cents. But is my 100 cents accurate? Did I miss something? Is the earning power there? Are the assets really worth what they're saying? And is management honourable, or will they run off with the money?"

Net-nets are not for faint of heart
01/09/13   Value Investing
"Strategy Lab contributor Norman Rothery recently tackled an issue that's important for those investors who rely on screens to identify attractive stocks. Should you buy all of the stocks that pass your screen, or simply view them as prospects, which require additional analysis before you sort out winners from losers?"

Ryan Morris, activist value investor
12/21/12   Value Investing
"When an activist investor like Carl Icahn tries to take over a household brand, it plays out on CNBC. Most shareholder struggles occur when little-known investment funds try to take over little-known companies like InfuSystem. Of the more than two dozen activist battles in 2012, most involved companies with a market value under $50 million."

Simple but not easy
11/24/12   Value Investing
"Tobias Carlisle makes the case for quantitative value."

Mohnish Pabrai and Guy Spier talk
08/23/12   Value Investing
"Mohnish Pabrai and Guy Spier share their considerable wisdom with UC Davis's MBA Value Investing class on 8/22/12."

Global Value: 10 Year CAPE
08/22/12   Value Investing
"Over seventy years ago Benjamin Graham and David Dodd proposed valuing securities with earnings smoothed across multiple years. Robert Shiller popularized this method with his version of this cyclically adjusted price-to-earnings ratio (CAPE) in the late 1990s, and issued a timely warning of poor stock returns to follow in the coming years. We apply this valuation metric across over thirty foreign markets and find it both practical and useful, and indeed witness even greater examples of bubbles and busts abroad than in the United States. We then create a trading system to build global stock portfolios based on valuation, and find significant outperformance by selecting markets based on relative and absolute valuation."

Tim McElvaine's conference
08/22/12   Value Investing
"Tim talks about his portfolio and the world more generally at his partners' conference."

Why does financial strength forecast stock returns?
08/18/12   Value Investing
"The authors measure financial strength with Piotroski.s F-score. They demonstrate that investors can achieve higher returns by investing in stocks of firms with greater financial strength primarily because of institutional demand for stocks with better F-scores and the gradual incorporation of public information into stock prices. Stock return momentum and institutional momentum trading cannot fully explain the relationships between the F-score and subsequent returns and the F-score and subsequent institutional demand."

Lonely puppies
07/28/12   Value Investing
"I have often owned companies with little to no sell-side analyst coverage. Ask yourself this, how many companies trading on US exchanges are there: that have no analyst coverage, that are US-based, that have a Market Cap over $250 million, that aren't passthrough vehicles, and have pitiful liquidity at least"

Howard Marks interview
07/16/12   Value Investing
"Howard Marks, chairman of Oaktree Capital Group LLC, talks about Europe's debt crisis, the global economy and investment strategy."

Why value stocks lag
05/26/12   Value Investing
"Wherein it is observed that value stocks have performed poorly of late. If the pattern holds, value portfolio managers will start to be fired and people will chase after expensive stocks like Facebook. It should all set up some rather good times for patient value investors."

Buy Low, Sell High
05/13/12   Value Investing
""Buy low, sell high" is often quoted in finance. While its wisdom is hard to question, its application is hardly extensive. To understand why this is so, it is helpful to put ourselves in the shoes of a typical investor."

The devil in HML's details
05/11/12   Value Investing
"This paper challenges the standard method for measuring 'value' used in academic work on factor pricing and behavioral finance. The standard method calculates book-to-price (B/P) at portfolio formation using lagged book data, aligns price data using the same lag (ignoring recent price movements), and hold these values constant until the next rebalance. We propose two simple alternatives that use timely price data while retaining the necessary lag for measuring book. We construct portfolios based on the different measures for a US sample (1950-2011) and an International sample (1983-2011). We show that B/P ratios based on timely prices better forecast true (unobservable) B/P ratios at fiscal yearend. Value portfolios based on the most timely measures earn statistically significant alphas ranging between 305 and 378 basis point per year against a 5-factor model itself containing the standard measure of value, as well as market, size, momentum and a short term reversal factor."

Which price ratio outperforms the EM?
05/01/12   Value Investing
"Having just anointed the enterprise multiple as king yesterday, I'm prepared to bury it in a shallow grave today if I can get a little more performance. Fickle."

Which price ratio best identifies value stocks?
05/01/12   Value Investing
"Which price ratio best identifies undervalued stocks? It's a fraught question, dependent on various factors including the time period tested, and the market capitalization and industries under consideration"

Howard Marks at NYSSA
04/14/12   Value Investing
"Howard Marks, legendary investor and Chairman of Oaktree Capital Management, spoke at New York Society of Securities Analysts. He is also the author of the book, "The Most Important Thing: Uncommon Sense for the Thoughtful Investor." Distressed Debt Investing was in attendance as he presented his views on the topic of "Human Side of Investing.""

Leucadia Letter
04/13/12   Value Investing
"A world-wide recovery in the near future is not a foregone conclusion. Europe and the future of the Euro are far from settled. Growth in China is slowing and the risk of a "Chinese Spring" cannot be ruled out. Iran is a big problem. In an environment of slow growth at home and a dysfunctional government, we believe that less financial leverage is better. We expect many other companies and investors share this view. We emphasize that we are not pessimistic, just cautious."

Stocks are a little pricey: Schiller
03/27/12   Value Investing
"'Technology has a's part of our sense of the future,' he says. 'We've got an exciting thing going. All the new gadgets are just so breathtaking, there's going to be huge fortunes made. That kind of excitement I do feel in the air.' Having said that, Shiller is not predicting another tech bubble, far from it. He says predicting bubbles is impossible: 'It's like predicting an epidemic. It depends on the contagion of emotions and of ideas.' Furthermore, the author of Irrational Exuberance, which presaged the bursting of the tech bubble, and Animal Spirits believes there's a lot to be worried about."

Chou Annual
03/27/12   Value Investing
"Here is a funny story of a French tourist visiting Canada. Pierre, an expensively attired middle-aged French tourist on his first trip to Toronto strolls into the bar of his 5-star hotel. The elegant hostess smiles, leads him to a table and beckons her prettiest server to take care of him. They talk, flirt a little and she giggles a bit. When he draws her closer and whispers in her ear, she gasps and ..."

Mohnish Pabrai lecture
03/07/12   Value Investing
"Mohnish Pabrai, Managing Partner, Pabrai Investment Funds talks to Ivey students"

RIP: Walter Schloss
02/20/12   Value Investing
"Walter Schloss, the money manager who earned accolades from Warren Buffett for the steady returns he achieved by applying lessons learned directly from the father of value investing, Benjamin Graham, has died. He was 95."

Is the Value Effect Seasonal?
01/26/12   Value Investing
"This paper extends the research on value premium by examining patterns of seasonality exhibited in the book-to-market effect in major global equity markets. The results provide evidence supporting the January effect in the value premium phenomenon. Using stock market indices for Asia Pacific Europe, Australasia, and Far East (EAFE) and Europe, with and without the U.K., Scandinavian countries, the U.K., U.S., and Japan form 1975 through 2007, the paper provides out-of-sample evidence from twenty-one countries that comprise different index portfolios. As a robustness measures, we use regression analysis, paired means tests, and non-parametric tests to examine whether the persistence of the anomalous January value premium is real and significant. The annualized excess January value premium ranges from 42.96 percent for Scandinavian countries to 9.24 percent for EAFE markets with 20.28 percent for U.S. Even though such a predictable pattern exists, our analysis suggests that large standard deviations would not allow a viable investment strategy."

Invest like a legend: David Dreman
01/26/12   Value Investing
"How I'd invest $100,000 right now: I'd put it in good-quality stocks in a portfolio large enough to diversify, or, for the average investor, an index fund. Stocks have traditionally gone up if we see inflation coming. We're not seeing much inflation yet, but we've been printing an awful lot of money in the United States, they've printed $7 trillion since 2008. I've never seen the two not meet."

Scouring the market's bargain bin
01/03/12   Value Investing
"As a long time value investor, one of my favourite research tools is the famous Ben Graham "net-net working capital" screen. This analysis begins with current assets - typically dominated by cash, accounts receivable and inventories - and then deducts all liabilities, not just current liabilities, to arrive at a net working capital per share value. No value is given to fixed assets such as plant, machinery and real estate, nor to intangibles such as goodwill, patents, licenses or other intellectual property."

A market that even a skeptic can like
12/31/11   Value Investing
"One of Canada's pickiest and most careful money managers has been on a buying spree lately. Early in July, Vito Maida had the maximum 25-per-cent cash he's permitted to hold in running the Horizons North American Value ETF. Today, while many individual investors are paralyzed with indecision about where to put their money, he's fully invested. 'I would say that this is the first time in a long time that we've been able to construct a portfolio of high-quality companies at very attractive valuations,' Mr. Maida said. Translation for non-hardcore investors: There are some good companies available right now at attractively low prices."

Cutting buffett helps sequoia fund
12/29/11   Value Investing
"Ruane ran an unconventional fund, closing Sequoia to new investors in 1982 because he didn't want its size to limit what the fund could buy. It opened again in 2008, three years after Ruane's death. Ruane also held a concentrated portfolio. In 2003, Sequoia had 75 percent of its money in its top six holdings, according to a regulatory filing."

106-year-old stockbroker talks shop
12/26/11   Value Investing
"Irving Kahn has been following the swings of the market since before the Great Depression...and he still does."

Buying a dollar for fifty cents
12/03/11   Value Investing
"What makes the stock of particular interest to a value investor is the fact that management reports the value of the investment portfolio every quarter and, as of Oct. 31, the investments and cash were valued at $1.15 a share. So, you are effectively buying an actively managed resource portfolio at 50 cents on the dollar."

Charlie Rose interviews Seth Klarman
11/26/11   Value Investing
"Award-winning journalist Charlie Rose interviews Seth Klarman, co-chair of the Facing History and Ourselves Board of Trustees, about his deep commitment to the work of Facing History and his thoughts on philanthropic and financial investment."

Longleaf Q3
10/14/11   Value Investing
"I think the future of equities will be roughly the same as their past in particular, common-stock purchases will prove satisfactory when made at appropriate price levels. It may be objected that it is far too cursory and superficial a conclusion that it fails to take into account the new factors and problems that have entered the economic picture in recent years - especially those of ... the movement towards less consumption and zero growth. Perhaps I should add to my list the widespread public mistrust of Wall Street as a whole, engendered by its well-nigh scandalous behavior during recent years in the areas of ethics, financial practices of all sorts, and plain business sense."

The Indian who bailed out Bank of Ireland
09/08/11   Value Investing
"When Bank of Ireland faced an imminent nationalization earlier this summer, a group of North American investors pumped in $1.6 billion to keep it out of the hands of the Irish government, in return for up to a 35% stake in the iconic commercial bank, whose roots date back to 1783. The lead investor in the deal was the Toronto-based Fairfax Financial Holdings Limited, led by Hyderabad-born Prem Watsa, who may be a virtual unknown in the country of his birth, but is fast building a reputation as an investment wizard in his adopted land and also within the global value investing community."

A value investor's best friend in China
09/01/11   Value Investing
"My experience with statistically cheap China-based investments has not always been positive. It dates back 20 years or more to the TSX-listed Noble China, which had the Chinese licence for Pabst Blue Ribbon, a particularly tasteless American beer. The whole episode ended in tears for the shareholders. So, I am not about to invest my life savings in American Lorain, but I think that Ben Graham would approve a modest exposure."

Advice from Irving Kahn
08/23/11   Value Investing
"At Columbia Business School, Kahn served as an assistant to economist Benjamin Graham, the value-investing guru whose principles of caution and defensive investing inspired a cadre of disciples that includes Warren Buffett. It's an investment strategy born of the beating Graham had taken in '29, and Kahn adopted it as his own. "I stopped wasting time on what people claimed a stock was worth and started looking at the numbers," he says. "This may surprise you, but there were a large number of valuable buys during the Depression.""

Watsa sees dirty thirties pain ahead
08/10/11   Value Investing
"The U.S. economy appears to be heading toward a lengthy period of deflation such as the one that struck Japan, and there is little policy-makers can do to prevent it, says one of Canada's most accomplished investors. But it isn't just the United States and Europe that Prem Watsa is worried about. The potential bursting of a property bubble in China has him even more concerned. And if Chinese demand for commodities dries up at the same time as U.S. consumers are shutting their wallets, then the global economy is in for a lengthy period of pain."

Bob Rodriguez's perspective
06/06/11   Value Investing
"Since coming back to work on Jan. 1, he has found himself galled once again by what he sees. Fund managers, emboldened by their mammoth gains, clamor for risk. Junk bonds remain wildly popular. Even more stunning, says Rodriguez, is the government's failure to address its debt. 'I know one thing from business,' he says, his voice quavering as he tries, mostly successfully, not to yell. 'Unless you correct the problems that are already occurring, you don't add on new leverage and new, other responsibilities until you correct the old! All you're going to do is capsize the ship!'"

Seven takeover targets
05/23/11   Value Investing
"Picking takeover candidates for fun and profit is a perennial investment sport. How can it not be? When one company takes over another, it typically pays a 20 percent to 70 percent premium over the target's prevailing stock price. Takeovers can enrich investors instantly."

Is value compensation for distress risk?
05/20/11   Value Investing
"This study provides a comprehensive investigation of the relation between the value anomaly and distress risk. Using risk measures based on accounting models, structural models, credit spreads and credit ratings, we find no relation between the value premium and distress risk. Our findings are inconsistent with the notion that the value effect is a compensation for distress risk."

Think big and go broke
05/06/11   Value Investing
"Alcoa, with its two AA's, is the first symbol alphabetically in the Standard and Poors 500 Index. It is also traditionally the first S&P company to report quarterly earnings. Why? With results like these over the last 17 years one would think that the SEC would have to drag the results out of them. Or maybe Alcoa executives would hide 'til midnight Friday and put out a press release when no one would be likely to report it. But no, this capitalistic catastrophe is Johnny on the spot every quarter, and neatly illustrates an investing nugget my partner Edwin Levy and I stumbled upon nearly twenty years ago. After faithfully perusing the Value Line Survey every weekend for many years, we noticed that over half of the companies portrayed didn't actually make any money. Value Line follows almost 2000 stocks in its main survey, so this is quite a mouthful, but so many of them look like Alcoa here. They report earnings, to be sure, and we all understand the denotation of "earnings". We mean GAAP, or in some technology companies we mean near GAAP, but only after we fudge some of the expenses. We generally get the hang of Generally Accepted Accounting Practices. But when we say "profits", it has a connotation very different. We know intuitively what a profit is at a local bakery. Profit, in every day speech, means money that we can take out of a business and spend on completely different things--- schools fees, new cars, diamond rings---and when we come back on the Monday morning, we still have an asset to come back to. You can see for yourself that that in no way describes Alcoa."

Why this value investor holds cash
03/17/11   Value Investing
"The Canadian stock market is more vulnerable to a major pullback than its U.S. counterpart, warns one of Canada's more successful money managers of the past decade. "We think that valuations in Canada, in particular, are at a very dangerous level," said Vito Maida, founder of Toronto-based investment firm Patient Capital Management Inc. "Equities in Canada have, I think, gone to levels that are not attractive today, and could be in for a serious correction.""

Tim McElvaine talk
02/16/11   Value Investing
"A rare talk from one of the nicest value investors in Canada."

Follow the Cash
01/30/11   Value Investing
"'A company can transfer that free cash flow to shareholders even without sales growth. That's our theology!' jokes the former seminarian. Double-digit cash-flow yields look very attractive compared with 10-year Treasuries yielding roughly 3.5%."

Peter Cundill's last interview
01/27/11   Value Investing
"Reporter David Berman spoke with the legendary investor, who passed away this week, for the February issue of Report on Business magazine. Here is Mr. Cundill's last interview."

Hedge Fund Analyst Checklist
01/23/11   Value Investing
"Anyways, I was cleaning out some old files and came across these notes from the class and thought I would repost them as they are a wonderful guide for a young analyst on how to think about investing in stocks."

Prem Watsa sees commodity bubble
12/02/10   Value Investing
"Never mind the current hype over commodities: Prem Watsa and his team at Fairfax aren't convinced that resources and agricultural goods will continue to skyrocket. "Anything that everybody thinks is going to happen worries us," Mr. Watsa said in an interview. "The excesses get built up. Recessions take them out.""

Neosho Capital Q3-10 commentary
11/27/10   Value Investing
"When asked how he had weathered the 2008/9 financial meltdown, Markowitz said he had been moderately liquid going into those years, thanks to having sold off some of his 20-odd ETFs and some of his Kraft holdings. Thinking that his own use of MPT, CAPM, Monte Carlo simulations, etc. formulas, had contributed to his decision to reduce his allocation to securities in the run-up to the '08/'09 meltdown, we were surprised when Markowitz confessed, somewhat sheepishly, that it was a phone call with his friend, "Steve", a hedge fund manager, who advised him to sell off a significant enough portion of his holdings prior to the panic that started in September of 2008. Given this admission, we wonder if a further updating of the MPT models is needed to reflect this invaluable step: Call Steve. The trick will be finding a way to put this extra step into algorithmic form."

Life and investing after Buffett
11/21/10   Value Investing
"So it may be time to start taking a look at Berkshire substitutes. While no company is a Berkshire clone, a couple of U.S.-based holding companies offer a similar mix of experienced management, financial heft and the assurance that your money is being overseen by value-oriented investors who have much of their money riding along with yours."

You Can't Be Too Thin
11/06/10   Value Investing
"Roger Ibbotson has devoted a career to answering a question that has defied the greatest minds of finance. Namely, why some securities offer better returns than others, even when they have a close resemblance. Now a 67-year-old finance professor at Yale University, Ibbotson thinks he's discovered the answer. It's liquidity. Or the lack of it."

Patient Capital 2010 Q3
11/01/10   Value Investing
"At current bond prices we strongly believe prospective returns are very low while the potential for loss is extremely high. If interest rates were to rise to only one half of their historical average fixed income securities would suffer substantial losses! We would recommend only very short term fixed income securities at this time. For those looking for income, high quality dividend paying equities are safer and will likely provide returns that are superior to fixed income alternatives over the next several years."

Enduring Values, Enduring Value
10/31/10   Value Investing
"There are four ways to create wealth it is not just cash flow. They are, one, having cash flow from operations available to security holders. A company can use that cash to expand its asset base, reduce liabilities or distribute the money to shareholders, either by paying dividends or buying back stock. Two, and probably much more important, is having earnings, which we define as creating wealth while consuming cash. Remember, though, that earnings for most companies do not have a long-term value unless the company also has access to capital markets because if it doesn't, sooner or later, it will to run out of cash. The third - and very, very important - value-creation method is resource conversion. Such as? Mergers and acquisitions, changes in control, massive recapitalizations, spinoffs, etc. The fourth wealth-creation method, which I touched on previously, is having extremely attractive access to capital markets."

Darwin's darlings
08/25/10   Value Investing
"The premise of the report was that undervalued small capitalization stocks (those with a market capitalization between $50M and $250M) lacked a competitive auction for their shares and required the emergence of a catalyst in the form of a merger or buy-out to close the value gap."

Tim's 2010 Conference
08/02/10   Value Investing
"Glacier, Indigo, EGI Financial, Sun-Rype Products and Arlington, which is a little bit of a special situation. But all of these companies, I think, are really through any restructuring. They're somewhere in various stages of cash generation or discovery, and whether or not we sell them or not, depends an awful lot on the price they're trading at."

Mr. Market refuses
07/25/10   Value Investing
"I like sitting on Uncle Warren's knee while he talks about the time he swapped a bag of cocoa beans for a controlling interest in Berkshire Hathaway: 'For several weeks I busily bought shares, sold beans, and made periodic stops at Schroeder Trust to exchange stock certificates for warehouse receipts. The profits were good and my only expense was subway tokens.' Great story, Uncle Warren. I'm right now trying to buy Pfizer with a paper clip and some pocket lint"

Sticking to what works
07/06/10   Value Investing
"This month Sequoia Fund marks its 40th anniversary. It's a milestone rarely achieved in an industry where three years is considered long term. Even more remarkable is that Sequoia is being run pretty much the same as it was when Warren Buffett's friend and stockbroker, the late Bill Ruane, launched the fund in 1970. It's still a concentrated portfolio with two or three dozen stocks, all heavily researched and bought with the idea that the market is valuing them at less than their true worth. Co-managing the fund is Robert Goldfarb, whose tenure at the New York firm dates back to 1971."

Gross profitability as a predictor
05/12/10   Value Investing
"Controlling for gross profitability dramatically improves the performance of value strategies, especially among large, liquid stocks. A value-weighted portfolio that is long (short) the extreme high gross profit-to-assets, high book-to-market (low gross profit-to-assets, low book-to-market) produced by a double sort on the two ratios generates an average monthly excess return of 1.16%"

Meeting notes
05/11/10   Value Investing
"The Inoculated Investor has a series of handy notes from the Berkshire, Markel, Wesco and VIC meetings"

Graham and Doddsville spring 2010
05/09/10   Value Investing
"This issue features an interview with Glenn Greenberg, founder and portfolio manager at Brave Warrior Capital. Mr. Greenberg outlines his high concentration, low turnover investment approach, with a focus on growing, high quality companies that also offer attractive and defensible free cash flow yields."

Winters lecture
04/28/10   Value Investing
"David J. Winters, the managing director of Wintergreen Advisers, LLC talks to UWO class"

Mohnish Pabrai interview
04/12/10   Value Investing
"'All man's miseries stem from his inability to sit in a room alone and do nothing.' And all I'd like to do to adapt Pascal is, 'All investment managers' miseries stem from the inability to sit alone in a room and do nothing.'"

Chou's 2009 letter
03/26/10   Value Investing
"we believe that investment and non-investment grade corporate bonds are now fully priced. It is similar with equities. Most stocks are now close to being fairly priced and it is harder to find bargains. Although we won't likely see the lows that we saw in February/March of 2009, the risks of investing in equities are greater now."

Sir John's prophetic memo
03/25/10   Value Investing
"Obsolescence is likely to have a devastating effect in a wide variety of human activities, especially in those where advancement is hindered by labor unions or other bureaucracies or by government regulations. Increasing freedom of competition is likely to cause most established institutions to disappear with the next fifty years, especially in nations where there are limits on free competition. Accelerating competition is likely to cause profit margins to continue to decrease and even become negative in various industries."

Could investors use a little magic?
03/12/10   Value Investing
"Graham implied that he had back-tested this formula, saying that investors could expect a 15% or more annualized return plus dividends and minus commission expenses, but he didn't provide clear statistics in his interview for how his formula actually performed. However, according to investment firm Tweedy Browne's pamphlet "What Has Worked in Investing," finance professor Henry Oppenheimer ran Graham's screen for stocks listed on the NYSE and AMEX from 1974 through 1980. Oppenheimer found that an investor employing Graham's method over that time achieved an annual return of 38% compared with 14% per year return calculated by the Center for Research in Securities Prices, or CRSP, of NYSE-AMEX securities. A seven-year period doesn't completely prove the validity of a formula, but that time frame is arguably long enough to suggest that the formula may be onto something."

Sears letter
03/08/10   Value Investing
"Some contend that there is an inherent conflict between labor and capital, yet they fail to appreciate that without investment there will be no growth and no jobs. For there to be investment there needs to be an expectation of profit, and, for there to be an expectation of profit, there needs to be hope and belief in the future and confidence in the rules of the game."

McElvaine annual
03/06/10   Value Investing
"Going forward, I expect that you will see more money invested outside of Canada and in larger companies. This is not particularly a change; I'm just going back to my Cundill roots to some extent. In the past couple of years, when Canadian ideas were slim, rather than invest outside of Canada, I superconcentrated and stayed invested in small caps. This clearly had painful results. While we will continue to have a significant small-cap portfolio, I am now finding interesting large-cap non-Canadian ideas."

Patient Capital Q4 letter
03/06/10   Value Investing
"In essence do valuations reflect the risk of the current environment and do they provide an acceptable rate of return given those risks? In our estimation, current aggregate equity prices have run far ahead of economic fundamentals."

Buying earnings and book value
03/02/10   Value Investing
"The paper shows that book-to-price facilitates the determination: for a given earnings yield, book-to-price indicates additional return associated with expected growth."

Betting on the blind side
03/02/10   Value Investing
"Michael Burry always saw the world differently - due, he believed, to the childhood loss of one eye. So when the 32-year-old investor spotted the huge bubble in the subprime-mortgage bond market, in 2004, then created a way to bet against it, he wasn't surprised that no one understood what he was doing. In an excerpt from his new book, The Big Short, the author charts Burry's oddball maneuvers, his almost comical dealings with Goldman Sachs and other banks as the market collapsed, and the true reason for his visionary obsession."

Vito Maida Interview
02/08/10   Value Investing
"Jonathan Chevreau interviews Vito Maida of Patient Capital Management."

Chanticleer's Q4
01/27/10   Value Investing
"Waiting for the undiscovered, undervalued stock to approach intrinsic value can seem like you're a fisherman waiting for the fish to bite. Sometimes you just don't know when or how value will be realized but you suspect that dinner will eventually find its way into your boat."

7 of 10 robot picks beat market
12/29/09   Value Investing
"If only robots could skip, click heels or cock their elbows like celebrating hockey players. Surely our robotic stock selection tool would be that animated after posting such a great year. Ten stocks a robotic or automated filtering technique helped us choose for 2009 would have turned a million dollars into $1.685 million, if we hadn.t used play money."

Rodriguez flouts 'small mind' investor rules
12/04/09   Value Investing
"Robert Rodriguez ignores most rules of the mutual-fund industry, an approach that's helped him beat all rival managers over the past 25 years."

Think like Buffett
12/03/09   Value Investing
"Buy-and-hold investing has its share of fans. If you admire Warren Buffett, Benjamin Graham, David Dodd, Charlie Munger, John Templeton, Joel Greenblatt or Seth Klarman, you're one of them."

Has market got ahead of itself?
11/12/09   Value Investing
"It's common to hear investing pros marvel at what they see as the passivity and fearfulness of the individual investor. But with the stock markets up from their bear market lows by about 50 per cent in just eight months, there are those in the financial world who think stocks have gotten ahead of themselves. Mr. Maida is one of them."

Patient Capital Q3
11/12/09   Value Investing
"Perhaps most worrisome is that the appetite for excessive risk has returned. Some market observers have commented that hedge funds and speculators are borrowing US dollars at close to zero interest rates and investing the proceeds in the financial markets. In Canada, we have witnessed a renewed interest in speculative resource investments. In the past this behaviour has not bode well for future equity returns."

Cheap and ugly can be beautiful
10/21/09   Value Investing
"Bruce Greenwald talks value investing in 2 parts."

Solid investor Howson hands off reins
10/04/09   Value Investing
"Rick Howson, who excelled in managing the same value-style Canadian equity fund for two full decades until stepping down this week, was never what you would call a high-profile "star" manager."

Kahn's top picks
10/04/09   Value Investing
"Another Kahn favourite is pork processor Seaboard, which has managed to remain profitable even as larger competitors have stumbled. "I don't eat pork, but a lot of people do," he says."

Jean-Marie Eveillard interview
09/14/09   Value Investing
"I'm old enough to remember when banking was a fairly simple, almost utility-type business, where the bank took deposits and made loans to the local businessman, to individuals, etc. And it was not a highly profitable business, and bank stocks sold cheaply, at book or slightly above or below book. They were looked at, I think, by most investors, a little bit like electric utility stocks, whereby you got a decent yield, there was not much growth, and the profitability was not great, but they were looked at as safe investments for widows and orphans. And then, as time went by, and I think beginning with a gentleman who used to run Citibank in 1970, when he said, "We're gonna grow our earnings per share 15% a year forever." Banks became something different in the past 10 years or more. They became disguised hedge funds because of the importance of proprietary trading, and for other reasons as well."

A superb fund rebounds
06/02/09   Value Investing
"Hawkins and Cates are self-assured stock pickers, as indicated by their willingness to pile a huge percentage of Longleaf's assets into just a handful of companies. As of March 31, multimedia entertainment conglomerate Liberty Media (LMDIA) made up 14% of assets. Once-dominant computer maker Dell (DELL) accounted for 10%. Chesapeake Energy (CHK), an oil-and-gas producer, and Sun Microsystems (JAVA), which is being acquired by Oracle Corp., together made up 16%."

Reflections and outrage
06/02/09   Value Investing
"I believe superior long-term performance is a function of a manager's willingness to accept periods of short-term underperformance. This requires the fortitude and willingness to allow one's business to shrink while deploying an unpopular strategy. Additionally, in the low return changing world I foresee, a well diversified mutual fund of U.S. stocks will likely have a harder time outperforming the stock averages and index funds, as a result of its higher expense ratio. A more focused strategy will be necessary to excel. If active managers continue to adhere to their old practices, we should see a contraction in the active mutual fund management universe over the next five to ten years."

Patient Capital May 2009 letter
05/25/09   Value Investing
"We are willing to make one prediction; over the next five years long dated government securities will likely provide negative real returns. In our view, 'safe' government instruments are some of the riskiest investments available. Today three to five year Government of Canada bonds are yielding approximately 1.75% while bonds with a maturity of ten years or more are yielding 3.75%. These rates are substantially below long term averages and imply very little if any inflation in the future. We believe that the odds are very much against such a scenario."

Longleaf annual presentation
05/25/09   Value Investing
"The Longleaf Partners Funds are pleased to make excerpts from our May 7, 2009 Annual Presentation available to all shareholders online via Windows Media Player. These recorded sessions will allow those shareholders not able to attend the meeting to hear the comments and views of the Portfolio Managers."

Mohnish Pabrai at Columbia
05/23/09   Value Investing
Last bit of a lecture by Mohnish Pabrai at Columbia [video]

David Winters interview
05/20/09   Value Investing
"Winters says the best-of-breed businesses he favors are available today not only at 'the right price', but that they're actually 'very, very cheap'"

Fairholme OID interview
04/16/09   Value Investing
"I am more optimistic now than at any time. I can't tell you whether it's going to be 31 days or 31 months or longer before our portfolio companies begin to rise from the ashes. However, I do believe they will rise."

Depression survivors weigh in
04/10/09   Value Investing
"The three Depression survivors aren't just notable because of their ages; they're good - very good. All three have been longtime successful money managers, and two were friends and students of the great Benjamin Graham. (Walter Schloss, for example, is one of the 'Superinvestors of Graham & Doddsville' that Warren Buffett referred to in his famous 1984 Columbia University speech.) Here's a summary of what they had to say"

Chou 2008 letter
04/02/09   Value Investing
"The examples show that the pricing of risk has changed 180 degrees from a couple of years ago. One can argue that corporate bonds, both investment grade and non-investment grade, are mispriced more than equities. In addition, if corporate bonds are cheap, the treasuries are in bubble territory. In our opinion, this is the worst time to hold cash and short-term treasuries unless you believe we are headed into a 1930's style depression. If you believe that you should redeem all of your Fund units."

Will value investors win the day?
03/04/09   Value Investing
"In today's market, people may lose a lot of money before they make more. Yet even times like these could prove profitable in the long run for value investors."

Value investors can't beat this bear
03/02/09   Value Investing
"Usually, the silver lining for such a brutal market is that it creates plenty of opportunities for bargain-hunting investors. This downturn, however, has been especially cruel to "value" investors, those who search for companies they believe are priced lower than they should be."

Piotroski profits
02/23/09   Value Investing
"Piotroski sought companies trading with very low price-to-book value ratios. These are often financially distressed, which is why investors tend to steer clear of them. They are cheap because they deserve to be. But occasionally, they're solid companies that are being unfairly neglected and present real buying opportunities, if you can separate the trash from treasure."

Markets in 19th century Britain
02/16/09   Value Investing
"This article examines the size and value anomalies using an original dataset consisting of monthly information on stock prices and annual information on dividends for 1,051 stocks traded in the London Stock Exchange between 1825 and 1870. In this historical British stock market, smaller stocks are found to deliver significantly higher returns than the larger ones. Value stocks indicated by high dividend yield also have higher average returns than growth stocks. The empirical evidence from this article provides important and fresh new empirical evidence on the asset pricing anomalies, suggesting that the size and value anomalies are unlikely to be random events that just appeared by chance."

Patience pays off
02/11/09   Value Investing
"Maida, the son of Italian immigrants, grew up poor in Toronto's west end; he was that kid who owned just two pairs of pants. His father was a construction worker, and when his mother was sick, the family relied on help from social welfare agencies. 'Not being well off instilled in me the value of a dollar,' he says. 'That's really the crux of the whole adherence to value investing: don't lose money, because money is really hard to come by.'"

The relative cash holdings premium
02/11/09   Value Investing
"A hedge strategy that is long (short) stocks of firms with high (low) cash - to - assets ratios generates an average monthly return of 0.42%, before trading frictions. In other words, relative cash holdings may carry a positive premium for investors."

Patient Capital Q4 2008
02/10/09   Value Investing
"We believe that despite the current environment the profitability of most major businesses will be higher in five years than it is today. A look over the past century shows how resilient free market economies truly are; despite two world wars, a depression, an oil shock and a multitude of other crisis, businesses and stock markets have continued to grow. It is truly remarkable how the human spirit seems to triumph over all sorts of adversity."

Longleaf Q4 2008
02/06/09   Value Investing
"Academicians Eugene Fama and Kenneth French recently published a study that found that value stocks have declined two years in a row only five times: during the Great Depression in 1929-32; at the beginning of WWII in 1939-41; during the Arab oil embargo of 1973-74; when the Internet bubble popped in 2001-02; and now as the housing bubble deflates. Following the four prior periods, stocks snapped back by an average of 60% in the next 12 months."

Using the price-to-book ratio
02/06/09   Value Investing
"Price-to-book ratios have been studied extensively, with some studies suggesting a low price-to-book can lead to a strong stock price rise in the future."

Value investing comes back into vogue
02/06/09   Value Investing
"The celebrated value investor Warren Buffett stepped back on to the investment trail this week as his parent company Berkshire Hathaway injected SFr3bn ($2.6bn) in fresh capital into the struggling insurer Swiss Re. The deal, which will pay Buffett hefty annual interest and give him the right to raise his stake at an attractive price, is a sign that the billionaire investor has not lost his appetite for financial stocks."

Money for nothing
01/20/09   Value Investing
"Anyone attuned to the pop music scene during the roaring 1980s, will perhaps remember the above title was an era-defining big hit for the British group Dire Straits back in 1985. However, the intent of this essay is not to write about showbiz, nor about the sometimes surreal behaviour of its protagonists. Rather, focus will be directed towards the surreal behaviour of stock market players during the latest crash and how cash was demonstrably given away for nothing in return; Money for Nothing if you will."

Fundamental value investors
01/15/09   Value Investing
"We examine novel data on the detailed investment decisions of professional value investors. We find evidence that value investors are not easily defined: they exploit traditional tangible asset valuation discrepancies such as buying high book-to-market stocks, but spend more time analyzing intrinsic value, growth measures, and special situation investments. We also test whether fundamental value investors outperform the market in our sample (January 2000 to June 2008). Analyzing buy-and-hold abnormal returns and calendar-time portfolio regressions, we conclude that value investors have stock picking skills."

Leucadia's unmined potential
12/06/08   Value Investing
"Leucadia National may be the closest thing to what Berkshire Hathaway was 20 years ago, before Berkshire became so large that Warren Buffett needed investments of several billion dollars to move the needle."

Patient Capital Q3
11/20/08   Value Investing
"The next several quarters are likely to be quite difficult but out of these difficulties will emerge the opportunity to create portfolios of great businesses that will offer the potential for a substantial return over the next five years. For the first time in a long time we are starting to feel excited about the returns available to the prudent and patient investor!"

We're not dead yet
11/19/08   Value Investing
"In our opinion someone who says quant equity investing has no future is basically saying that value and momentum will no longer work to pick investments. As we noted above we can see where people get this idea. Many investors using these strategies have had poor recent performance, and it.s clear that these strategies are no longer a secret. Although we can't 'prove' that quant investing has a future, we can demonstrate that quant strategies have had a successful long-term past - and that their recent performance is not inconsistent with this track record."

Q3 2008 Oakmark commentary
10/18/08   Value Investing
"In fact, we believe the decline in the market has created a very attractive environment for investing new capital. For most people, the right question to ask after a big decline is: 'Should I be investing more?'"

Concentrated value investing
10/18/08   Value Investing
"Mohnish Pabrai, the Managing Partner of the Pabrai Investment Funds, has outperformed market indices over the last nine years by consistently believing in concentrated value investing. Pabrai likes to hold fewer stocks positioned in industries that he understands well, paying attention to two key variables: the intrinsic value of a business and its current price."

America for sale: price reduced
10/13/08   Value Investing
"At the depths of the 1973-74 bear market -- the worst of the post-war period -- when the Dow Jones industrial average was approaching its low of 577, Warren Buffett told Forbes magazine that he felt like "an oversexed guy in a whorehouse. This is the time to start investing." Buffett's words may have been indelicate -- Forbes ended up changing the world "whorehouse" to "harem" when the interview ran -- but the CEO of Berkshire Hathaway was on the mark because that era produced some of the best bargains of the past 50 years."

Think long
10/12/08   Value Investing
"It is also possible to see bargains at the individual stock level. Both BP and Shell have a dividend yield equal to, or higher than, their p/e: an old rule of thumb for value investors. True, the oil price is falling sharply, but shares in oil companies lagged well behind the crude prices when it was soaring to $147 a barrel."

The market's silver linings
10/12/08   Value Investing
"Bolton's reasons for optimism aren't macroeconomic; the UK is almost certainly in recession for the first time in almost two decades. But he believes the high level of dividend yields compared to gilt yields, and the large cash positions in mutual funds and hedge funds, are good indicators that the market's fortunes may be about to change. "In some sectors, I'm seeing the lowest valuations I've seen in more than 30 years," Bolton says. He says he likes the look of the consumer cyclical sectors, such as the general retailers and media stocks. "Media has underperformed the market for the last seven consecutive years, and both [retail and media] are unloved by institutional investors [at the moment]," he says."

Eveillard proteges prowl for bargains
10/09/08   Value Investing
"The two, who hunt the globe for companies whose worth they believe analysts have misjudged, viewed International Speedway more as a media company. It's a classic page out of the playbook of value investors, something that comes naturally to de Vaulx and de Lardemelle, who worked for years under one of the best: Jean-Marie Eveillard."

A contrarian gets the last laugh
10/01/08   Value Investing
"Vito Maida says he's lucky. But he could just as easily say, "I told you so." More than four years ago, with stock prices roaring upward and a global real estate boom gaining pace, the Toronto money manager sat down to pen his thoughts on the markets, and realized that his views were out of step with the rest of the financial world."

Ways to gauge value
09/10/08   Value Investing
"It's what every analyst likes to cite and probably the most widely used tool on Wall Street. But the price/earnings ratio, or P/E, of a stock might not be the perfect gauge of its value, especially now."

Longleaf Partners Q2 2008 letter
08/14/08   Value Investing
"We do not know how long economic uncertainty and shareholder fear will last. Bear markets do not die of old age. The mispricing, however, is providing the opportunity to own high quality companies with terrific five year outlooks that imply high long-term IRRs. We are aggressively adding personal capital to the Funds and encourage our partners to do the same. Given that bullish sentiment is at its lowest level in 14 years and that some are recommending exiting equities altogether, there is plenty of panic in the air. Historically, the best time to invest has been when owning stocks has felt the worst."

Value stock losers Buffett, Miller poised as winners
08/11/08   Value Investing
"The five prior times since 1952 that growth beat value two years in a row, the latter group recovered and won by 17 percentage points annually on average for seven years, the data from Societe Generale show. Cheap stocks are becoming more attractive because of tumbling commodity shares, which had led the five-year bull market that ended in October, according to Societe Generale's James Montier"

CanWest woes may force Fairfax's hand
08/09/08   Value Investing
"Fairfax Financial Holdings Ltd. has made a name as a patient, deep-value investor in the mould of Warren Buffett's Berkshire Hathaway Inc., so the company has been surprised to find itself cast lately in the role of an activist player."

Robert Tattersall
08/09/08   Value Investing
"If you can tolerate double-digit losses like the ones we've seen recently, veteran fund manager Robert Tattersall suggests picking up a classic book on value investing and then just sitting tight. "

Value funds may be poised for comeback
08/09/08   Value Investing
"There's an old chestnut about value investors that says they're never wrong, they're just early. Unfortunately for the professional ones, when you run a mutual fund that gets marked to market every day though, it doesn't really matter. If you're early, you're wrong, and if you're wrong, you get redeemed as investors chase performance like a dog chases a rolling Frisbee."

Patient Capital Q2 2008
08/04/08   Value Investing
"As we had hoped these investor fears have provided us with some investment opportunities. Indeed we have invested some of our capital in what we believe to be very strong companies that offer the potential for excellent long [term] returns."

Fairfax Financial beats bad markets
07/28/08   Value Investing
"Prem Watsa, Chair of insurance conglomerate Fairfax Financial Holdings Ltd., began to worry about a credit meltdown a few years ago. So he and his investment team devised a defensive strategy. Today, Fairfax is in great shape financially, despite lousy markets. The company has even defied gravity and two weeks ago its credit was upgraded. This reflected its stellar investment performance on its US$19.8 billion investment portfolio, good operations at its underlying insurance companies and a jump in shareholders. equity from US$2.856 billion in 2006 to US$4.8 billion today."

The marks of a great value investor
07/23/08   Value Investing
"John Templeton's market aphorisms was that "the time to buy is at the point of maximum pessimism", although I believe he has a good claim also to be the true originator of the saying that the four most dangerous words in investment are "this time it's different". Does he think that we have reached such a point in the credit crisis? Alas, we shall never hear his views again, following his death two weeks ago at the grand age of 95."

John Templeton
07/18/08   Value Investing
"Sir John Templeton spent his life going against the flow. In September 1939, when the war-spooked world was selling, he borrowed $10,000 to buy 100 shares in everything that was trading for less than a dollar a share on the New York Stock Exchange. All but four eventually turned profits. In early 2000, conversely, he sold all his dotcom and Nasdaq tech stocks just before the market crashed. His iron principle of investing was 'to buy when others are despondently selling and to sell when others are greedily buying'. At the point of 'maximum pessimism' he would enter, and clean up."

Eveillard takes dim view of U.S. stocks
06/27/08   Value Investing
"Fed policies under Greenspan, Eveillard says, precipitated "one bubble after another" -- from the implosion of technology stocks in the late 1990s to the recent real-estate price collapse and the related financial-services industry meltdown. "In the last two or three years, the financial acrobatics were extraordinary," Eveillard said. "You could get a mortgage without having to document your income, your assets, or whether you had a job."When financial history is written five or 10 years down the road," he added, "Greenspan will be seen as the worst Fed chairman since the Fed was created in 1913.""

Value investors: Beware the value trap
06/23/08   Value Investing
"Norm Rothery, chief investment strategist at Windsor, Ont.-based investment research and counselling firm Dan Hallett & Associates Inc., recommends investors avoid value traps by using a nine-point system developed by Joseph Piotroski, professor of accounting at Stanford University. According to his system, returns on assets and cash flow from operations should be positive. Also, there should be momentum in fundamentals: For example, gross margins and debt should be changing for the better. Still, it's inevitable even the best of the value practitioners will stumble into value traps on occasion."

Rising from the stock market rubble
06/21/08   Value Investing
"The lock that commodities have on the Canadian market has made mutual funds with a value strategy a singularly awful investment in the past few years. But the Celestica story is a reminder that well-chosen value stocks do offer potentially fantastic rebound potential. What beaten-down Canadian stocks might be ready to pop? Let's nose around the portfolios of some of the country's top value fund managers and see what they're holding."

Credit crunch prepares feast for value hunters
06/15/08   Value Investing
"Value investors look at measures such as price-to-earnings and price-to-book ratios to find stocks that are trading at bargain prices. A key premise of value investing is that markets often overreact to negative news, pushing stocks below their true worth. The idea is to buy the stocks when nobody else wants them, so you can profit when the market comes back to its senses. Sound simple? It isn't. Buying stocks others are ditching requires a strong contrarian streak and loads of patience while you wait for the price to recover. Sometimes it takes years; sometimes it never happens."

Value strategies reward patience
06/02/08   Value Investing
"The academic community has generally come to the conclusion that value investment strategies, on average, outperform growth strategies. Where the agreement ends is on the reasons behind the outperformance."

Conventional wisdom, foiled again
06/02/08   Value Investing
"It is widely assumed that a stock.s price will rise when it is added to a major stock market index. As is often the case with conventional wisdom about the stock market, however, the truth is more complicated. In fact, a new study has found that over the long term, stocks that are dropped from an index generally outperform those that are added."

Patient Capital Q1
05/26/08   Value Investing
"In fact we strongly believe that there is more trouble to come. Historically, there has never been a time when real estate values have declined dramatically without serious economic fallout."

Fixes for bad timing
05/14/08   Value Investing
"Investing too early is one of the more common sins of value investors. Watching as that well-researched idea you loved a few months ago falls 20% to 30% can be painful and nerve-racking. Bruce Berkowitz, of the highly successful Fairholme fund, calls it "premature accumulation." Getting your timing wrong is inevitable -- especially in today's market, in which stock prices continue to plumb new depths in a wide variety of industries."

Doubling down in financials
04/24/08   Value Investing
"Do clients ever get upset with you? They read the paper and then see that their money manager is busy buying the financials. The single most common question I get: .Don't you read the newspaper? What is wrong with you?. So does the Pzena client need a strong stomach? Of course. We try and educate the clients before they open an account. We promise them that we will have these bad periods. Every single client, before they sign up, knows how badly we did in the last cycle. In the Internet bubble, the market was going up 30% a year, and we were going down. We were 60 percentage points behind the market, underperforming it for 10 consecutive quarters in '98, '99 and the first couple months of 2000. Now, that was extreme. The Internet bubble was extreme. We don't have such an extreme bubble today. But this is what we do: We buy bargains."

Sequoia fund to reopen
04/24/08   Value Investing
"The Sequoia Fund, after experiencing selling by investors, is reopening its doors May 1 to new investors for the first time since 1982. The $3.5 billion value fund is celebrated for outperforming the broader market during much of its 38-year history. For years, it was run by legendary stock picker William Ruane, who followed the same approach as Benjamin Graham and Warren Buffett."

Leucadia's 2007 letter
04/21/08   Value Investing
"One of us has been mumbling about Credit Armageddon for years and it seemed earlier this year that his fears were to be realized. At least for the time being, this nightmare has been avoided by strong government intervention. Unfortunately, we suspect that the wizards of Wall Street have not only made mischief in the mortgage market, but in all other loan markets as well and that the full effect of this is not yet visible. It seems that almost all financial institutions and investors have mispriced risk, and many financial institutions have found themselves carrying assets on their balance sheets at amounts considerably higher than market or their intrinsic worth. Recently, and often at the behest of regulators, financial institutions have been forced to sell these assets or to recognize the mark to market losses, all of which erodes net worth, forcing them to raise new equity capital and/or to reduce leverage, a process that has come to be known as deleveraging. It may take quite a while for the scrubbing of balance sheets and the unwinding of leverage to come to an end, and we suspect that not all will survive."

Feast with the vultures
04/05/08   Value Investing
"A more rewarding approach may be to invest in companies such as Leucadia. Like Berkshire Hathaway, these are publicly traded holding companies run by managers with histories of sniffing out value. Yes, the risks are more concentrated. But returns, on average, exceed those of the typical value fund over the past decade. Patience is crucial, since returns can fluctuate unpredictably, rising in years when managers sell profitable investments and stagnating when they hold a lot of cash. Because of the stock market sell-off, share prices of many of these players are cheap vs. historic norms. And after largely sitting on the sidelines during the bull market, many of the companies are flush with cash. They are positioned to take advantage of lower stock prices as well as a projected spike in the default rate for U.S. speculative grade bonds."

Crossing the rubicon
04/04/08   Value Investing
"In light of the above comments, the partners of FPA came to a unanimous conclusion that the recent Federal Reserve actions and the potential new Congressional policies under consideration are likely to lead to a significantly higher level of long-term inflation in the U.S. We are more than disappointed in the substandard decision making that has taken place within the Federal Reserve and other governmental entities these last several years. The misguided monetary policies of the former Chairman of the Federal Reserve, Alan Greenspan, created an era of 'too big to fail' that has led to two major asset bubbles. With each successive bubble, the policy actions available to the Federal Reserve to reduce financial system risk have been systematically reduced. The extraordinary actions taken by the Bernanke Federal Reserve reflect acts of desperation rather than long-term policy solutions. The rapidly changing events within the capital markets are forcing the Fed to adopt policies that have the potential of long-term negative consequences."

How fund manager didn't lose a bundle
04/03/08   Value Investing
"As for where Mr. Rodriguez is betting now? He's still bearish. He's on a "buyer's strike." But he is considering his next moves. He views the recent partial bailout of Bear Stearns as "a short term positive but a long term negative . for the dollar and for inflation." The reason? Once again those who behaved irresponsibly or worse are sticking everyone else with the tab. "This has expedited the socialization of risk and moral hazard, exponentially," he says. Stay tuned."

Miscalculating the risks
02/23/08   Value Investing
"Inside his boardroom, Prem Watsa keeps an unusual artifact: a bronze bust of Sir John Templeton, the 95-year-old legend of value investing. The item was a 50th birthday gift for the chairman of Fairfax Financial Holdings Ltd., but also serves as a source of inspiration. The Templeton principles, after all, underpin much of Fairfax's investment philosophy: Be flexible; search around the world for the best bargains; and above all else, go against the crowd - buy when others are pessimistic, and sell when optimism rules. It's the last of these that led Mr. Watsa - until recently one of the most beleaguered executives on Bay Street - to one of the most stunning investments of his career, and has given him a way to silence his many critics. Fairfax this week disclosed an annual profit of $1.1-billion (U.S.) for 2007, nearly four times what the insurance and investment company had earned in its best year the year before. Much of that was the result of a single, contrarian bet the firm made that the world had got it wrong about risk."

Watsa says credit squeeze still in 'early days'
02/22/08   Value Investing
"Fairfax, which owns Canadian and U.S. insurers, said earlier today that fourth-quarter net income tripled to $563.6 million, or $30.15 a share, from $159.1 million, or $8.45 a share, a year earlier. Annual profit more than quadrupled to $1.1 billion, the Toronto-based company said. Fairfax had gains of $705.2 million in the quarter after the company bought credit-default swaps to profit from asset writedowns at U.S. banks. Losses and writedowns among the world's largest financial companies have risen to at least $146 billion after the subprime mortgage market collapsed amid record loan defaults. Watsa, 57, said there are more losses to come."

Seth Klarman's talk at MIT
02/14/08   Value Investing
"Many investors lack a strategy that equips them to deal with a rise in volatility and declining markets. Momentum investors become lost when the momentum wanes. Growth investors - who pay a premium for the fastest growing companies - don't know what to do when the expected growth fails to materialize. Highly leveraged investors, like some quant funds in the headlines, were recently forced to sell regardless of value when their methodology produced losses rather than gains. Counting on a government bailout for every market crisis seems a dicey proposition, especially when supposedly impossible events happen on Wall Street every few years. By the time the market drops and bad news is on the front pages, it is usually too late for investors to react. It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the stock market or economy. Value investing, the strategy of buying stocks at an appreciable discount from the value of the underlying businesses, is one strategy that provides a road map to successfully navigate not only through good times but also through turmoil. Buying at a discount creates a margin of safety for the for imprecision, error, bad luck or the vicissitudes of volatile markets and economies. Following a value approach won.t be easy for everyone, especially in today.s media-dominated, short-term oriented markets, in that it requires deep reservoirs of patience and discipline. Yet it is the only truly risk averse strategy in a world where nearly all of us are, or should be, risk averse."

Patient Capital Q4
02/08/08   Value Investing
"The possibility of faltering earnings in a weakening environment coupled with a whiff of inflation has put market participants in a skittish mood. As a result, investors that were recently very optimistic are now frightened. We view economic contractions as a very normal part of the business cycle and welcome such times as an opportunity to purchase excellent businesses at very attractive prices."

Why it's fair weather for Fairfax investors
01/21/08   Value Investing
"There was one reason Fairfax, a holding company with subsidiaries in the property and casualty and re-insurance business, landed in the company of the "recession-proof" fast-food restaurant and the seemingly unstoppable value investment vehicle run by the Oracle from Omaha Mr. Buffet: Credit Default Swaps. Analysts are twigging to Fairfax's portfolio of credit default swaps, with a "notional" value of US$18.5-billion against a purchase price of US$343-million, perhaps the perfect hedge against the economic turmoil that led to yesterday's dramatic stock market sell-off."

The prince of value
12/05/07   Value Investing
"If there's such a thing as an aristocracy of American investing, Christopher Browne is a full member. He's one of five managing directors of Tweedy Browne, a firm co-founded by his father, who brokered stock trades for Benjamin Graham, the creator of modern securities analysis. Later, when Graham's most illustrious pupil, Warren Buffett, wanted to take a controlling interest in a then sleepy textile company called Berkshire Hathaway, Tweedy Browne bought the stock. Given this lineage, it's hardly a surprise that Browne would become a spokesman for Graham's and Buffett's investing philosophy."

He has never been more bearish
11/23/07   Value Investing
"Mr. Watsa never lost his image as a skilled investor. Hamblin Watsa Investment Counsel, Fairfax's internal money management firm, earned 17.7 per cent returns, compounded annually, on its stock investments between 1997 and 2006. "If they can make 7 per cent [on the whole portfolio, including bonds], the earnings power is ridiculous," said Wade Burton, a portfolio manager at Mackenzie Financial Corp.'s Cundill Investment unit, which is one of Fairfax's largest shareholders. "They're in a really good place right now." Mr. Watsa suggested the decision to put 75 to 80 per cent of Fairfax's portfolio into government debt - "for the first time, I think, ever" - reflects his view that credit markets will take a long time to digest the problems in the U.S. real estate and mortgage business."

A seasoned pro scoops up mortgage stocks
11/11/07   Value Investing
"As mortgage insurance stocks have gone into freefall over the past month, speculation has been intense about whether a deep-pocketed investor would step in and start buying, in the belief that the stock prices had fallen too far. Old Republic International, a sleepy Chicago-based insurance company led for the last 17 years by Aldo Zucaro, has made that bet."

Accounting for leverage
11/11/07   Value Investing
"The B/P ratio can be decomposed into an enterprise book-to-price (that pertains to operations and potentially reflects operating risk) and a leverage component (that reflects financing risk). The empirical analysis shows that the enterprise book-to-price ratio is positively related to subsequent stock returns but, conditional upon the enterprise book-toprice, the leverage component of B/P is negatively associated with future stock returns."

Patient Capital Management's Q3 2007 letter
10/30/07   Value Investing
"Which asset class has performed better since PCM's inception in March of 2000; T-Bills or the S & P 500? T-Bills have outperformed the S & P 500 during the March 31, 2000 to September 30, 2007 period. The S&P 500 has generated a compound annual rate of return of only 1.92% compared to an average yield of 3.18% for T-Bills over the same period. This fact may be a surprise to many because of the strongly ingrained belief that equities always outperform fixed income instruments."

The lone raider
09/29/07   Value Investing
"Over the past three years, the 47-year-old Armoyan has been on a tear, seizing control of a dozen mostly beaten-up but asset-rich companies, including Versacold Income Fund, a refrigerated warehousing/trucking outfit; Royal Host Real Estate Investment Trust [RYL.UN-T], a hotel owner and franchisor; and General Donlee Income Fund [GDI.UN-T], which makes aircraft components. Armoyan's modus operandi is the same in almost every case: He quietly starts accumulating shares through his principal public investment vehicle, Clarke Inc. [CKI-T] Then, when he crosses the 10% threshold that requires him to publicly disclose his holding, he demands seats on the target's board of directors and input into management. The goal is to gain control and then engineer a turnaround, or sell off the company for a profit as soon as opportunity knocks."

Absence of fear
09/24/07   Value Investing
"There have been several studies as to how inflated housing prices had become prior to the present correction. According to the work done by Gary Shilling.s firm, home prices would have to correct between 22% and 28% to return to the equivalent of the median asking rent or to the trend line of the CPI. Prior to 1996, both of these measures approximated the rate of increase in home prices. According to Robert Shiller of Yale University, his real quality-adjusted existing house price index would have to correct nearly 45% to bring it back into alignment. My initial reaction to this estimate was one of disbelief and that it appears excessive; however, home prices would appear to have a considerable way to fall, given the high level of total homes available for sale. With nearly 4.5 million homes for sale in 2007, this compares to an average of approximately 2.5 million homes since 1990 or an excess of approximately 2 million homes. Since 1965, the median dollar volume of single-family homes sales as a percentage of nominal GDP has averaged 8.4% versus 16.3% at the 2005 peak, according to Northern Trust Global Economic Research."

Take-home lessons on value investing
08/31/07   Value Investing
"If price volatility isn't a proper measure of risk, fluctuations can afford an investor the opportunity to purchase a business for less than it's worth, according to value investors like Pabrai. When the market smells trouble and sends a stock's price down, value investors smell a potential overreaction and get to work valuing the business."

Why disciplined value investing is so difficult
08/29/07   Value Investing
"Ask yourself a simple question, Jean-Marie Eveillard says. "If Warren Buffett is the second-richest man in the world, why aren't there more professional value investors?"

The evolution of the idea of 'value investing'
08/21/07   Value Investing
"Benjamin Graham and David L. Dodd's Security Analysis, first published in 1934, brought structure and logic to the field, creating an intellectual framework for sound investment. In an area where much looks foolish shortly after publication, Graham's principles have proved reliable for over sixty-five years."

In the risk-reward game, Hartco worth holding
08/12/07   Value Investing
"A general rule of investing is the higher the potential rate of return, the greater the degree of risk. One way that this relationship expresses itself is when people chase yield. We did exactly that with our purchase of Hartco Corp. at prices from $3.02 to $3.46 over the past year or so."

Prem Watsa Intelligent Investing Lecture
08/05/07   Value Investing
"The topic of Mr. Watsa's keynote speech was Ben Graham and Bubbles."

The value of Fundamental Indexing
07/25/07   Value Investing
"Proponents of market benchmarks weighted by such factors as dividends, earnings or sales claim that an investment management revolution is afoot. But is the concept really new - or is it just a cleverly repackaged version of the discipline known as value investing?"

The bargain basement isn't empty
07/01/07   Value Investing
"Jeremy J. Siegel, a professor of finance at the Wharton School of the University of Pennsylvania and an adviser to WisdomTree Asset Management, is also a believer. He said that value stocks "have been bid up a bit more than they have in the past," but that "it is not a time to abandon value and go for growth. In the long run, value stocks have done better.""

Tight times for deep value investing
06/22/07   Value Investing
"Barbee keeps a watch-list of companies with share prices trading below book value, or net worth (essentially, a company's assets minus liabilities). When the overall market bottomed in late 2002 and early 2003, Barbee found that some 500 stocks were trading below book value (he screens for all stocks with market values of $70 million and up). By early 2004, the number had shrunk to about 100 and has stayed there ever since. "Everyone's had a chance to sift through the bathwater," Barbee says. As for the remaining bargain-bin merchandise, the average discounts are not as large as they once had been, and the quality of the typical company is not as strong."

Eveillard: A value maestro's encore
06/19/07   Value Investing
"For almost 30 years, global fund manager Jean-Marie Eveillard made a lot of money bucking trends. After a two-year break, he's back."

In a rocky stock market, play it safe
06/18/07   Value Investing
"Up and down Wall Street, traders' screens are green, signaling that these are great times for stock market investors. The S&P 500 and the Dow Jones Industrial average are setting all-time highs. So much cash is sloshing around the sidelines, and borrowing costs are so low, that practically each day brings news of asset sales or corporate takeovers. Reuters. Chrysler. Stuyvesant Town. MGM. It all seems like the late 1990s."

Some 'value' stocks are just losers
06/17/07   Value Investing
"Most veteran value investors have a story about the stock they wished they had let get away. The shares looked attractive and the company's worst troubles seemed behind it. But instead of a quick fix, they got quicksand; the stock languished, a waste of money and time. For John Linehan, manager of the T. Rowe Price Value Fund, such disillusionment comes from a stake in Boston Scientific. The medical-device company appeared to have healthy demand for its products and its costs were under control, he says, but tough competition and an expensive acquisition of heart-device maker Guidant has proved otherwise."

Fairfax braces for meltdown
05/27/07   Value Investing
"Prem Watsa says investors around the world are not being paid enough for the inherent risk in stocks, bonds and real estate. The chair of Fairfax Financial Holdings Ltd. is not crying poor for successful capitalists like himself, though. He is sounding a warning call to investors, big and small. The renowned but recently embattled sleuth of under-valued assets . an acolyte of Depression-era investment theorist Benjamin Graham . has acted on his concern to protect his stable of general insurance and re-insurance companies."

Patient Capital Q1 2007
05/15/07   Value Investing
"Charts 2 and 3 show the Dividend Yields of the TSX and the S & P 500 over long time frames. The dividend yield is our preferred aggregate market valuation method. Cash dividends paid to shareholders are real; there are no debates about methodology and quality of earnings when compared to the Price/Earnings ratio nor relevance when discussing the market's Price/Book ratio. As my accounting professor used to say "if it doesn't jingle it doesn't count!""

Watsa's foray at Torstar
05/07/07   Value Investing
"What is he doing? That has been the reaction in some quarters to the recent news that Prem Watsa's Fairfax Financial Holdings Ltd. has bought a good-sized position in the class B nonvoting shares in Torstar Corp., a company controlled by the owners of its class A voting shares. It's not known what value investor Watsa plans to do with what is his first such foray, but there are precedents for such activity."

Aegis Fund overcomes 'worst stock pick'
04/12/07   Value Investing
"Barbee, who has managed Aegis Value since it opened in 1998, buys companies trading at a discount to book value, or assets minus liabilities. The average market capitalization of companies in his fund is $869 million, compared with the $1.3 billion average for those in the Russell 2000 Value Index, which tracks the smallest U.S. companies."

Top funds stand by subprime bet
03/09/07   Value Investing
"In recent weeks, as mortgage defaults have risen, shares of subprime lenders have plunged. Countrywide Financial, one of the nation's largest subprime lenders, sank 16.1 percent in the past month. Similarly, homebuilder stocks continue to slump - Pulte Homes, for one, is down 19 percent over the past year. This debacle has damaged the returns of many of the best fund managers around, including Bill Miller of Legg Mason Value (with a loss of 1.6 percent year to date), Ron Muhlenkamp of the Muhlenkamp fund (- 3.7 percent), and Wally Weitz of Weitz Hickory (- 0.7 percent). All three have held on to these stocks in the belief that real estate will rebound. How did these smart stock-pickers make such a big mistake? Well, actually, they don't see it that way. For these managers being out of step with the market is a sign that they are doing their jobs. After all, the best way to earn returns is by spotting opportunities long before everyone else."

Master of the turnaround
03/07/07   Value Investing
"It turns out that what Williams meant by invoking baboons is that he has a method of investing that has become as natural and comfortable as his own skin. So, sure, to him it seems easy. To learn about those methods, we chatted with Williams at his firm's Manhattan headquarters. We found Williams, who had come in for the day from his office in suburban Essex, Conn., east of New Haven, to be disarmingly unassuming and an investor who likes to keep things simple."

Are good companies bad investments?
02/26/07   Value Investing
"From 1983 to 2006, the mean annualized return of the less admired companies was 17.8 percent, beating the more admired group's 15.4 percent return. Interestingly, both groups beat the S&P 500's 11.2 percent return over the same period."

Patient Capital Management Q4
02/16/07   Value Investing
"As we enter 2007 we are again witnessing a period when investors are greedily buying. The absence of fear and complacency towards risk truly astounds us. As is usually the case, the cause for optimism and complacency is rooted in sharply rising short term security prices."

A wing and a prayer
02/16/07   Value Investing
"Value investing has never been sexy. It involves poring over a lot of financial statements to find companies with shares that are priced below their historic norm or below the inherent value of the business. That slow and steady approach tends to generate solid gains over the long haul (just ask Warren Buffett). But over the short term it can look awfully stodgy compared to growth investing, which tries to identify companies that are poised for rapid expansion - think of Apple Computer since the introduction of the iPod in 2001 and its iTunes online music store in 2003." [Note: Apple was a good value in the summer of 2002 when it traded at a market cap just above the amount of cash it had in the bank. At least that was my view when I bought a few shares.]

Undervalued airline came in top of class
01/20/07   Value Investing
"We all make mistakes. In fact, in May we hung out one of our own boneheaded moves, our "investment" in MRI manufacturer Fonar Corp. (FONR-Nasdaq). Though the stock had crashed to 26 cents from our purchase price of $1.25, we stuck with it because the chief executive officer had just bought shares at 55 cents, and management told a sweet story about the stock getting back over $1 by year end. No dice. We finally pulled the plug and took the tax loss at 30 cents, not far from its current trading price of 27 cents."

Arnold Van Den Berg interview
01/01/07   Value Investing
"Now there are basically four great psychological states you should look for. And you want to buy stocks that are selling for one of these four reasons. ... So you've got apathy, disgust, and fear and panic. But the ultimate state is anger."

10 mutt stocks that will shine in 2007
12/19/06   Value Investing
"My Dog Star list contains some of the market's most-reviled names. These beaten-down but sound stocks should rise in price in the new year."

Steal this column
11/29/06   Value Investing
"In the investing world, talk is cheap. We're bombarded by a never-ending stream of chatter in the form of newspaper articles, marketing material, television interviews and, yes, even magazine columns. Buy oil, sell gold, get out of the house builders, get into biotech stocks - how can an investor (especially one who is just starting out) make sense of this babble of often contradictory advice? It's easy. Stop listening to what the investment experts are saying. Look instead at what they're doing. While legendary investors like Warren Buffett won't take your phone calls, they are obligated by law to regularly report their major portfolio holdings. These days, thanks to the Web, you can click a few links and see exactly what these geniuses are up to. It's like being at a giant poker game, where you can peer over the shoulders of many of the smartest money managers on earth and see precisely what cards they're holding."

A bullish bet on joe consumer
11/28/06   Value Investing
"Q: What's another stock you like right now? A: Allstate (ALL). The company has had problems, but new management has come along and fixed it. They are at about eight times 2006 earnings, generating a lot of cash, and buying their own stock. But that is a company-specific play; I'm not buying insurance companies across the board. Q: What is the future of property and casualty insurers like Allstate that sell primarily through traditional brokers, given the success of companies such as Geico, which sells direct to consumers? A: I have no opinion. Q: You don't have an opinion, even though you see enough merits to the company to recommend it? A: If Allstate were 12 or 15 times earnings, those things become relevant. At eight times earnings, I don't care. It's a better company than it was; they fixed their problems and they are still selling cheap."

Pattison goes deeper into the woods
11/18/06   Value Investing
"But he has watched the sector for long enough from close up to know that when it seems beyond hope, that's probably the best time to put your money in. "We've been here [in B.C.] virtually all my life," he says. "Ever since I can remember, forest products has had its ups and downs and ups and downs . . . . Being up, you know it isn't going to last. And when it's down, hopefully it doesn't last." Some of the best value investors on the continent are thinking the same thing. Several have placed large bets that the red ink in the woods is bound to stop flowing, eventually, and that by investing now, they will reap huge gains in the recovery. Their theory, contrarian as it may seem, is that the industry's economics have been so bad for so long that it has no choice but to undergo massive change. Weak players will go bankrupt, scores of mills will close forever, and a wave of takeovers will knock out the smallest players."

Browne searches for value: why don't you?
11/16/06   Value Investing
"Tweedy, Browne is money management's equivalent of the Republican cloth coat: nothing flashy, ever dependable, transcending style. It is an organization that was founded in 1920 to deal in thinly traded stocks, and which in the 1950s realized that more money was to be made in owning such typically undervalued shares than in trading them. The firm began to take in outside funds in 1968, and has grown to now managing over $13 billion. It did not hurt that one of the firm's earliest and best clients was Benjamin Graham, co-author in 1934 of the nearbiblical "Security Analysis." Indeed, the company's early association with Mr. Graham (and proximity they moved into office space down the hall from the revered investor) led also to a relationship with Walter Schloss, Warren Buffett, and Tom Knapp, who joined the firm in 1957 and spear-headed its entr e into the investment game. These are formidable value bloodlines."

NYSSA honors Walter Schloss
11/10/06   Value Investing
""I worked for Benjamin Graham for 9 1/2 years, and Ben said he was going to retire and move to California," began Schloss. "I had to get another job, so one of the people who was a stockholder of Graham Newman came to me and said, 'Walter, if you start a fund, I will put some money in it.' We ended up with $100,000. The structure was that I would not get paid unless we realized gains. The kind of stocks I bought were not growth stocks. Graham was really value-oriented. In those days he would buy stocks that were selling below working capital. There were less of them, but they were still around." "Since I only liked to buy stocks that were undervalued from a statistical point of view, they were not necessarily great companies. There was no particular point in hanging on to them indefinitely. We were buying companies on the way down and selling them on the way up. Not every company worked out, but enough of them did, so we had a pretty good record.""

The Dodge & Cox mystique
11/04/06   Value Investing
"In its 76-year history, Dodge & Cox has launched precisely four mutual funds. The firm doesn't advertise and has no marketing department. Yet investors are so taken with its funds that it has had to shut half of its tiny lineup to new customers to stanch the flood of money."

Patient Capital Management Q3
10/27/06   Value Investing
"In essence these two books instruct its readers on how to apply Mr. Graham's principles. His two primary methods were to calculate a firm's long-term 'earning power' and purchase the shares at a price to earnings multiple of less than 10x's or purchase shares at net-net working capital. Graham argued and proved through his investment partnership that a well diversified portfolio of securities that fit either of these two criteria would provide excellent long term results with substantially less risk than the market."

Bill Miller's Q3 letter
10/26/06   Value Investing
"Behavioral advantages are the most interesting because they are the most durable. The field of behavioral finance is still in its infancy yet has already yielded results that can be incorporated profitably into a sound investment process. The best part is that such results are likely to be systematically exploitable and not able to be arbitraged away as they become more widely known. That is because they represent broad findings about how large groups of people are likely to behave under well-defined circumstances. Until large numbers of people are able to alter their psychology (don't hold your breath), there is money to be made from prospect theory, support theory, cognitive psychology, and neuroscience."

10 hated stocks you'll love in 2007
10/20/06   Value Investing
"Buy 'em when they're hated. I don't mean "out of favor" or "disliked." I mean HATED. And buy 'em at the end of the year. Not in November. Not in January. But around the middle of December. That's the simple foundation of the Dog Stars strategy"

Old growth as value?
10/20/06   Value Investing
"Investors looking to buy should look for four psychological states: apathy, disgust, fear, and anger. Of the four, anger is the most irrational--and offers a wonderful time to buy stocks."

Noise reduction
10/04/06   Value Investing
"Managing a $6 billion fund holding only 20 stocks requires strong conviction and an iron will - two traits Oakmark's Bill Nygren has in abundance."

Interview Charles de Vaulx
09/28/06   Value Investing
"Our featured guest this morning is Charles de Vaulx. He is the Chief Investment Officer at the First Eagle Funds Value Group, where he helps to manage about $32 billion. Charles' funds have had virtually no down years; he focuses on absolute rather than on comparative returns. He says if they don't find the security at the correct price, they are happy to just hold cash."

Seminar in value investing
09/17/06   Value Investing
"In this archive you will find recordings of guest lectures delivered by accomplished and world renowned investors. These individuals have generously contributed their time to share their insights with Columbia Business School students and have kindly agreed to have their lectures shared on this website as a valuable resource to the value investing community."

Value veteran dances to his own tune
09/02/06   Value Investing
"If you want to ask Tim McElvaine where stock markets are going, he will tell you that you've come to the wrong person. "I'm pretty sure that I am the only investor who missed the entire metals, minerals and oil and gas boom completely," says McElvaine, 43, manager of the $89.8-million McElvaine Investment Trust and president of Vancouver-based McElvaine Investment Management Ltd. "I joke with people that I dance to my own tune, in a corner," adds McElvaine, in his characteristic self-deprecating style. "Sometimes, out of sheer luck you will be in beat with the music and sometimes you will look awfully stupid. But at least you're enjoying yourself. That's where I am, dancing the foxtrot while everyone else is doing the rumba.""

Value vs. glamour stock returns
08/18/06   Value Investing
"This paper sheds further light into the discussion of whether the value premium is driven by risk or behavioral factors by providing out of sample tests using Canadian data, a search process that involves both P/E and P/BV ratios and a research methodology that minimizes any potential data snooping problems. We document a consistently strong value premium over the 1985-2002 sample period, which persists in both bull and bear markets, as well as in recessions and recoveries."

Miller says fund 'clearly wrong'
08/06/06   Value Investing
"Still, Value Trust is hanging tough on its key holdings, Miller and assistant portfolio manager Mary Chris Gay wrote in their quarterly letter to shareholders. "It is our willingness to own securities which other people regard as wrong which historically has been part of the long-term success of the fund," Miller and Gay wrote, adding that "in order to do better than the market longer term, you must be doing something different.""

Weitz Q2
07/23/06   Value Investing
" In this increasingly risky environment, we have focused on companies that can (1) survive financial market upheaval and (2) take advantage of distress sales of assets. Happily, in this increasingly speculative market, large growth companies with very strong balance sheets (e.g. Wal-Mart, AIG) have been out of favor and available at prices that value investors are willing to pay. Thus, as we have upgraded the overall financial strength of our portfolios, we think we have also increased the upside potential for our Funds. As for companies with the capacity to take advantage of capital markets weakness, we start with Berkshire Hathaway. Berkshire holds over $42,000 per share in cash and bonds that is available for investment and Warren Buffett is equally at home buying individual securities and whole businesses."

5-star stocks from the Markel portfolio
06/23/06   Value Investing
"In my view, Markel's success is largely due to its strict adherence to a timeless investment philosophy that seeks to invest only in profitable businesses with ample reinvestment opportunities that are also run by competent management teams. In addition, the executives at Markel have both the long-term orientation and patience to wait for these types of companies to become attractively priced. As a result, Markel rarely overpays, and its investments usually compound at least at the growth rate of the underlying business."

Deep value
06/21/06   Value Investing
"We based this screen on what Benjamin Graham recommends for the "defensive investor" in his 1949 classic, The Intelligent Investor. Among other things, we insisted that each stock's price be no more than 15 times its average earnings per share over the past three years, and that the overall portfolio have a P/E of no higher than 13."

Miller, Hodges bet on housing slump end
06/15/06   Value Investing
"The biggest slump in U.S. homebuilder stocks since 1994 has spurred investors with some of this decade's best records to snap up shares of Centex Corp., KB Home and Toll Brothers Inc. So far their confidence has been unrewarded."

Weighing options with Robert Olstein
06/12/06   Value Investing
"Hey home-gamers, don't beat yourself up for missing the options-backdating scandal. Even renowned stock sleuth Robert Olstein says it was nearly impossible to spot."

The magic money machine
06/09/06   Value Investing
"Whatever you think of its Magic Formula strategy, The Little Book offers one of the most succinct and straightforward explanations of value investing that we've read. It's even funny at times. But can it make you rich? Frankly, we're not sure. But what we do like about Greenblatt's system is that it's logical and builds on the writings of Benjamin Graham and Warren Buffett, two of the most successful value investors in history. As we discovered in a recent interview with Greenblatt, he pulls no punches when it comes to defending his strategy."

Muhlenkamp's methods
06/09/06   Value Investing
"Yes. I've been going to auctions since I was five years old. We sold calves and pigs at auctions when I was a kid. We'd do our Christmas shopping at auctions. I find myself telling people more and more, 'If you want to understand the stock market, go to auctions.' When I ask someone why he goes to auctions, he usually says something like, 'Every now and then you can get a good deal' Nonetheless, if one of something you own happens to sell for half price at an auction - and that auction is in the stock market - the headlines read, 'Stocks Cut In Half!' Bullshit. That day, there just happened to be no buyers. That happens at auctions all the time. But you can also get carried away at auctions. I've seen used bicycles sell for more than Sears charges for a new bike, just because two people happened to want that blue bicycle that day. That's just normal at auctions. A lot of people nowadays look at you sort of funny when you suggest going to auctions to understand the stock market, but back in the Midwest, where you and I come from, there didn't used to be much mystery about auctions. They were commonplace, anytime a farm was sold or a house broken up, there was an auction. And the bottom line is that people go to auctions for the volatility. If you want to avoidvolatility, you go to Wal-Mart. You literally go to auctions to take advantage of the volatility."

Book value bargains
06/06/06   Value Investing
"About 2 percent of all U.S. stocks sell for less than book value -- that is, less than the company's per-share assets minus liabilities. This might appear to be a paradox. After all, if a company were liquidated -- selling all assets and paying off all liabilities -- there would seem to be more cash than the market value of the stock. What's the catch? Liquidation may be unlikely. And it's always possible that the liabilities are understated or the assets overstated. Therefore, buying stocks below book value isn't a sure-fire strategy. Yet it is often a good one."

Value vs Glamour
05/29/06   Value Investing
"During the 23, rolling five-year periods in our study, among large-cap stocks, the Russell 1000 Value Index ended ahead of the Russell 1000 Growth Index 15 times, representing 65% of the five-year periods. For small caps, the Russell 2000 Value Index outperformed the Russell 2000 Growth Index in 21 of the 23 five-year periods, or 91% of the time."

FPA Annual
05/26/06   Value Investing
"We know we are at odds with most of the mutual-fund industry. As an example, the average liquidity of all equity mutual funds recently hit an all-time low of 3.7%, versus your Fund's record high of 43.6%. While we are being cautious, our competition seems to be very confident, and this is reflected in low stock-market volatility measures. Wherever we look, it appears that most investors are highly confident. Volatility in the bond market recently hit an all-time low as well. Yield spreads are quite narrow throughout all credit segments of the bond market. There seems to be very little worry about credit risk. Again, while others seem to be highly confident, we believe that it is prudent to exercise a higher degree of caution."

Global bargain hunter
05/23/06   Value Investing
"From his office in Boston, Horn scours the globe, from Scandinavia to Mexico, in search of dull stocks that happen to be cheap. The first thing he looks for in a company is not net earnings but free cash flow, which he defines as cash flow from operations minus maintenance-level cap-ex. "It's useless to use net profits to compare companies globally," he says, as the figures can be easily manipulated or affected by local accounting and tax rules. A software company, for instance, could capitalize or expense the cost of software development, while steel companies' tax rates could vary based on the country in which they operate. But, says Horn, "There's either cash, or there isn't.""

Value investors speak out
05/15/06   Value Investing
"Last week concluded a nationwide tour for the disciples of famous value investors, such as Warren Buffett and Ed Lampert, that has become an annual tradition in finance circles."

Patient Capital Management Q1
05/03/06   Value Investing
"There is a famous story in investment lore about ambitious young men hoping to get rich. Several young men had just graduated from college in the mid forties. Having seen the hardships of the Great Depression they sought out advice. They wanted to know how to accumulate wealth. They wisely asked the most distinguished and successful investor of the time for a meeting. Surprisingly the gentleman agreed. Realizing their good fortune they diligently researched and prepared several questions expecting a long meeting filled with much advice and many "golden truths". On the day of the anointed meeting these young men presented themselves to the great man's assistant and were shown into the boardroom. They marveled at the oak paneled furniture and luxurious setting. They could barely contain their excitement; they were going to learn the secrets to becoming rich. After what seemed like a very long time a distinguished, grey haired man entered the room and sat at the end of the very long table. One member of the group could not contain his enthusiasm. Much to the embarrassment of his colleagues he blurted out that they were interested in amassing a great fortune just as he had. Without hesitation the investor simply stated . . ."

Leucadia letter
04/23/06   Value Investing
"We have been unhappy with the GAAP reporting of tax assets mentioned above for some time. Early in the 1990's, the accountants adopted a rule, SFAS 109. Under this rule, which we disparaged back then, companies are required to recognize the non-present value of their NOLs and put them on the balance sheet as something called a Deferred Tax Asset. For up to the next twenty years, or as long as we have NOLs, we will report an income tax expense and the Deferred Tax Asset will be reduced by the same amount, but we will not pay cash taxes. This large asset may not become a reality until sometime in the future and we cannot begin to project when that will be. We long for the pre-SFAS 109 days when the NOLs rested peacefully in the footnotes until sometime in the future when they would be called upon to deflect taxation. Too much complexity robs simplicity and thus, understanding."

Traditions in value investing
03/14/06   Value Investing
"Value investing is partly a state of mind. It is characterized by habitually relating the price of a stock to the value of the underying business. Basic principles of fundamental analysis are the tools. They arise from three traditions"

Talking panic buying with Joe Feshbach
03/14/06   Value Investing
"Hedge fund manager Joe Feshbach looks for value in crisis. The manager of Joe Feshbach Partners seeks out companies that are in trouble, anything from accounting scandals to criminal investigations to management turmoil. In short, Feshbach likes to buy when everyone is selling."

5 key lessons from Bill Nygren
03/01/06   Value Investing
"Buy stocks only when they sell for at least a 40 percent discount from their fair market values. If things do not go as well as you expect with an investment, this provides downside protection. If things go well, this gives a slingshot effect on the upside as the market closes the gap between a firm's price and its value."

The price of victory
02/23/06   Value Investing
"Call him the bad-news bull. As chief investment officer of the $1.8 billion Olstein Financial Alert Fund (OFALX), Bob Olstein has made a career out of digging into the numbers and buying up the stocks everyone loves to hate."

A meeting with Mr. Greenblatt
02/15/06   Value Investing
"I have gravitated towards Buffett over the years. Good things happen to good businesses. I prefer good to cheap. But I do not categorize companies very often. I look at the spinoff area, for instance, but I am mainly looking for good businesses. I am an "equal opportunity money maker." It's all investing. Figure out what something is worth and pay a lot less."

The magic money machine
02/15/06   Value Investing
"In November, Joel Greenblatt, a hedge fund manager in Manhattan and now an adjunct professor at Columbia Business School, zoomed onstage with the fanciest money machine yet. Greenblatt, who is no fan of delicate understatement, calls his the Magic Formula and espouses it in his newly published treatise, modestly entitled The Little Book that Beats the Market. The Magic Formula consists of picking U.S. stocks that are both highly profitable (as measured by their return on capital) and also relatively cheap (as measured by their earnings yield)."

The best investor of his generation
02/12/06   Value Investing
"He walked away from Goldman, racked up better returns than Buffett...and talked kidnappers into letting him go."

How Eddie Lampert picks his stocks
02/12/06   Value Investing
"Like Warren Buffett, Eddie Lampert calls himself a "value investor," meaning he buys into companies whose assets he calculates are worth more than the current trading price. "The idea is that I'm going to pay this price and great things may happen, but they don't have to happen for me to do okay," he says."

Patient Capital Management Q4
02/09/06   Value Investing
"The overvaluation is even more evident when trying to find specific undervalued securities. In a Canadian universe of approximately seven hundred publicly listed companies with a market capitalization of greater than one hundred million we could only find thirty eight candidates with a debt equity ratio of less than one and a price to book ratio of less than 1.2x. During more typical market conditions this group would yield approximately two hundred prospects. In depressed markets this screen would provide more than four hundred possible investment opportunities."

Templeton's Mobius outlasts critics
02/05/06   Value Investing
"Mobius says his "buy-and-hold" strategy helps him to avoid chasing gains that may not last and to develop the wherewithal to invest in markets that have underperformed. "I'd love to be a stock jockey, but that implies that you're able to anticipate events that happen from one day to the next, and that's really impossible," he said. "We tend to take a longer view and not go overboard in any one direction.""

Value investing and the business cycle
01/22/06   Value Investing
"Empirical evidence suggests that value investing based on high valuation ratios (that is, book-to-market ratio, earnings-to-price ratio, cash flow-to-price ratio, and dividend yield) tends to outperform growth investing based on low valuation ratios. This superior performance is robust for all economic conditions, meaning that investors will be better off investing in stocks with high valuation ratios versus stocks with low valuation ratios regardless of economic conditions. The benefits of value investing are even greater during periods of contraction than during periods of expansion."

The little essay that beats the market
12/27/05   Value Investing
"So, what should you think? If you want to be a successful stock market investor, you should think about buying pieces of "good" businesses at "bargain" prices. Yes, that sounds simple, but if you actually could find a good business at a bargain price, wouldn't it make sense to buy it? Doesn't that sound like an investment strategy that should work!"

Peter Cundill in 1998
12/27/05   Value Investing
"For example, if you adjust for the market value of their share portfolios, today 35% of the 3,000 companies listed in Japan are trading below book value. Roughly 10% are trading below net-net working capital. And many of them trade below net cash (which I'll come back and define) and at big discounts to their intrinsic value if their businesses are worth 6 times EBIT."

Still going strong
12/19/05   Value Investing
"Kahn, the chairman of Kahn Brothers, a low-profile New York investment firm, might be Wall Street's oldest active investor. He's in the office every business day, reading scientific periodicals, annual reports and newspapers in search of undervalued stocks in the tradition of his friend and mentor, Benjamin Graham, widely considered the father of value investing."

Few bargains left
12/16/05   Value Investing
"Based on a price-to-cash flow basis, Europe and Asia are around 9 1/2 times, versus 12 1/2 times, roughly, U.S. At 12 1/2 times, the U.S. is not cheap by historical measures. We are very much valuation-driven, as opposed to outlook-driven. Not that the outlook seems very rosy, by the way, but it is more because of valuation. Five years ago, the beauty was we had a bifurcated, two-tier market with very expensive growth stocks and tech stocks on the one hand and quite a few cheap small and mid-cap value stocks on the other. That gap has disappeared, so everything looks quite expensive in the U.S."

Web site suggests financial planners
12/04/05   Value Investing
"He is a passionate about value investing, investing in seemingly cheap stocks: "Certain patterns are obvious," he says, "and one is that virtually every successful investor over any 10-year period has been a value investor. It doesn't take a genius to figure that out." Something can go wrong with even the best companies and that's the time to buy, when there is a "margin of safety," he said, quoting Benjamin Graham."

Audio interview with Irwin Michael
11/26/05   Value Investing
Find out what the ABC maestro is buying today. [MP3]

Patient Capital Q3
11/11/05   Value Investing
"Income trusts have also increased in value because interest rates have declined. In effect they have behaved like fixed income instruments; rising as interest rates fall. It should follow then that as interest rates rise income returns should at best be muted. In our view, the combination of unsustainable distributions, very high valuations and rising interest rates spell the potential for a substantial loss of capital in the future."

Disentangling size and value
11/11/05   Value Investing
"When we separate the size effect from the value-versus-growth effect, we find that size as measured by market capitalization is far less powerful than is generally believed. And, reciprocally, the value effect - because some of its efficacy has been siphoned off by the mislabeled size effect - is far more powerful and more consistent than is generally believed."

5 Dow dogs about to have their days
11/09/05   Value Investing
"The traditional Dogs of the Dow theory no longer works, so here's a better way. Track down giants like Wal-Mart and Home Depot that are snapping up their own stock."

Better than Buffett
11/07/05   Value Investing
"Companies mired in bankruptcy and turmoil may look ugly to some investors, but to Ian Cumming and Joseph Steinberg they're downright foxy. Using their publicly traded investment firm, Leucadia National, the duo have built a reputation as master takeover artists who buy distressed companies at discount prices, revive them and sell them for hefty profits."

Investing 'cult' could use more members
10/31/05   Value Investing
"Most business schools emphasize modern portfolio theory, the central tenet of which is that the market is so efficient it cannot be beaten with any regularity. Portfolio theory stresses, sensibly enough, diversification as the best way to spread market risk, but it also generally holds that because the market is efficient, those who beat it are lucky rather than skilled. As Buffett put it to me recently, ''You couldn't advance in a finance department in this country unless you taught that the world was flat.''"

Digging for deep value
10/28/05   Value Investing
"The basic idea of that approach is to find stocks that are attractively priced in relation to expected future earnings growth. And sometimes, the market hands value investors opportunities that are almost too good to resist. We'll call these kinds of stocks "deep value"."

Bill's bad bet
10/18/05   Value Investing
"As Miller sees it, "Five thousand years of commodity-price history" says that oil should be priced at the "marginal cost of production"--the price at which it makes sense for companies to find and extract it from the ground. And that, Miller says, is currently about $40 per bbl."

Weitz buys Wal-Mart, Tyco
10/06/05   Value Investing
"Weitz has managed the fund since 1986 and sticks to the value- investing philosophy developed by the late Benjamin Graham and adopted by Buffett, the world's second-richest man according to Forbes magazine's annual survey. He buys shares of companies he views as inexpensive that have products or services he understands, excess cash and limited competition."

FPA's Robert Rodriguez likes cash
09/20/05   Value Investing
"If I look at the marketplace in general, we see the market as being very flat in valuation. So therefore, the undervaluation in small- and mid-caps has effectively been eliminated in the last five years because of their superior performance vs. large-caps. There may be some value in the micro-caps. But we still think that the earnings expectations are still overstated on average. We have been saying for a while that earnings in large-cap stocks will be disappointing, and you are starting to see that now."

Betting against the crowd
09/20/05   Value Investing
"For contrarians like Wadhwaney, 51, investing is a matter of avoiding manias and searching instead for bedraggled castoffs that are cheap precisely because the In crowd won't touch them. "I don't buy prime merchandise," he says. "I buy stuff that's fraught with discomfort. I buy some terrible things." Terrible things that produce terrific returns."

Omaha's other oracle
09/18/05   Value Investing
"Although he operates with a decidedly lower profile than his Omaha neighbor Warren Buffett, Wally Weitz's investment record speaks volumes. His flagship Weitz Value fund has returned an average 15.7% per year for the 10 years through June 30, vs. 9.9% for the S&P 500. Since founding Wallace R. Weitz & Co. with $11 million in assets in 1983, Weitz now manages more than $7 billion. Weitz is finding plenty to invest in these days"

Olstein Annual
09/13/05   Value Investing
"We believe that any fund that doesn't admit to being a value fund (seeks to buy undervalued companies) is by admission willing to buy overvalued companies. Funds not paying attention to value (growth at any price, momentum, crowd psychology, etc.) are relying on the foolishness of other investors to make money and we believe only a select few can be successful at this greater fool's game. Admittedly, funds that are capable of consistently outguessing the psychology of crowds will probably have the highest returns. However, we believe that a fund that buys only growth companies at any price is playing Russian roulette with its shareholders' money."

Clipper Semi-Annual
09/08/05   Value Investing
"In the long struggle between mice and men, the rodents are winning. Their victory will create lower costs for most investors and lower income for some humans."

Cash is trash
09/03/05   Value Investing
"What to do with all that cash? Some value fund managers, flush with an influx of new money from clients, are letting it pile up rather than investing it in value stocks they view as too pricey. While they wait for a better day, other value managers say letting money sit around in cash is sinful, and they swear good buys still can be had."

Sequoia Fund shareholders' meeting
08/30/05   Value Investing
"I would add that while we have been pretty good at avoiding mistakes of commission, we have made significant errors of omission. I think that if I had to point to one big mistake we made, it was putting undue emphasis on possible macro economic problems and overreacting to some that seemed overwhelming at the time but were dealt with reasonably well."

Jeremy Siegel's buy list
07/22/05   Value Investing
"There's ample evidence that seeking above-average yields (and picking up value-priced bargains in the process) leads to outsized returns; this is basically the "dogs of the Dow" strategy played out on a larger field. Siegel reports that a portfolio owning the 100 top-yielding S&P stocks beat the index by 3 percentage points annually and smacked the lowest-yielding 100 by nearly 5 points. And so much for reward being earned by taking risk: The highest-yielding quintile was slightly more volatile than the index, but the lowest-yielding stocks were the riskiest of all."

A born gambler rolls the dice at 88
06/10/05   Value Investing
"Ever since Kirk Kerkorian revealed last month that he was buying a major stake in General Motors Corp., people have been speculating about his motives. Here's one safe bet: The wealthiest man in Los Angeles is not acquiring shares in the biggest and sickest automaker out of any special affection for cars."

Patient Capital Management Q1
06/03/05   Value Investing
"In March of 2000 we truly believed that over a typical five-year period we would be presented with enough attractive investment opportunities to get us into a fully invested position. As we have come to see the past five years have been anything but typical. While the technology based NASDAQ declined sharply the broader based TSX Composite and S & P 500 have remained largely unchanged. In addition, volatility in the share prices of the businesses that interest us have been unusually muted. Not surprisingly, the high quality investments that we seek have not reached our buy prices."

Clipper Fund's Q1
05/01/05   Value Investing
"Start with profits. After-tax profit margins on the Standard&Poor's Industrials are at a record high. Measured as a percentage of GDP, corporate profits are back to levels last seen in 1929. For capitalists, but not workers, these are the (relatively) good old days. It gets better.Not only are profits at historically high levels, but investors are willing to capitalize those profits at generous price-to-earnings ratios. Not only have (note the past verb tense) the prices of stocks been bid up, so have the prices of other long-term assets such as bonds and real estate. While owners have been getting richer, they also benefit from the conspicuous absence of one sometimes fatal fear that historically has afflicted the rich."

Find your investing edge
04/14/05   Value Investing
"Investing is competitive. There is a seller for every buyer, and transactions often reflect a difference of opinion. Buyers believe the prospective return on an investment is attractive relative to the risk entailed. Sellers usually disagree. One party will fare better than the other, and in my opinion the winners aren't random. How are they determined?"

The nature of risk
04/12/05   Value Investing
"We've come a long way these seven decades since Ben Graham first emphasized the margin of safety in Security Analysis. Unfortunately, the wrong direction."

The hunt for intrinsic value
04/10/05   Value Investing
"An investor, like a gambler doesn't know in advance whether a specific investment will make or lose money. But, unlike gambling, investing has expected returns that are positive. Unlike the average gambler, give an average investor enough time, and he or she will usually make a profit. One of the challenges in investing is to prevent acting emotionally and reducing those expected gains."

Jeremy Siegel's buy list
04/06/05   Value Investing
"Siegel suggests investors pursue what he calls "corporate El Dorados"--firms that maintain attractive growth and returns over very long periods. In Siegel's words, "persistence of good earnings growth is better than a transience of superb growth." Altria (NYSE:MO), Tootsie Roll (NYSE:TR), Colgate-Palmolive (NYSE:CL), and Royal Dutch Petroleum (NYSE:RD) would earn that label."

Bargain hunter
03/28/05   Value Investing
"Several findings are apparent from examining the table. First (and of foremost importance to me) is that buying cheap stocks did indeed outperform. Simply buying an equal weighted basket (assuming equal distribution of stocks across portfolios) of the lowest 20% of PEs within the MSCI World index generated significant outperformance (9.7% p.a. on average). Such a strategy would have only resulted in absolute losses in only five out of the thirty years in our sample."

Are big cash stakes bad for four prominent funds?
03/24/05   Value Investing
"In investing, the four-letter word that causes the most consternation is cash. It was almost heresy to mention it in the late 1990s, as equities soared to never-before-seen highs. In the subsequent downswing, cash suddenly came back in fashion. Now, after two years of heady gains, it's a bad word again. After all, if you hold cash in a rising market, there's a good chance you'll be left behind."

Small-cap contender
03/23/05   Value Investing
"Manager Curtis Jensen, 42, is a disciple of firm founder Marty Whitman's "safe and cheap" school of investing. That means he looks for companies with low debt, plenty of cash and lots of high-quality assets -- to ensure they can get through the tough times. What's more, Jensen won't buy a company unless its stock is selling for a fraction of what he estimates as its real worth."

Big stocks could have big year
03/20/05   Value Investing
"Large caps tend to be more stable, to have greater international exposure (a good thing when the dollar is weak, as it is now), to pay higher dividends and to hold up better than small caps during market declines."

Market phobia? Try value investing
03/13/05   Value Investing
"Some value managers just shrug and buy stocks that are cheap compared with all the others. Others load up on cash. When that happens, it's worth noting."

Century Management Q4
03/05/05   Value Investing
"The scope of this publication is greater than any we have written in our 30-year history. The purpose in writing this report is to point out that financially speaking, we are living in historic times. It is extremely unusual for all major asset classes (stocks, bonds, and real estate) to have been bid up to what appears to us as unsustainable levels, all at the same time."

If past bubbles are any indication...
03/05/05   Value Investing
"We're going to talk about bear markets. ... And while everybody thinks they're short term, they last somewhere between 15 and 20 years once they get going."

Sequoia Fund Q4
03/03/05   Value Investing
"We're less concerned with the annual movement in share prices than we are with the earnings progress exhibited by our holdings. If earnings grow, the stock price eventually follows." - 75% of the fund is in only 6 stocks

Whither the value investors?
03/02/05   Value Investing
"It's been popular to say lately that is now a stock pickers market. It probably is to a large extent; in fact, most of the time it is. Your success will primarily depend on what you pick. Don't forget that the best value managers don't always get the fundamentals right, just be wary of sweeping generalizations about them."

Clipper Q4
03/01/05   Value Investing
Lightning strikes twice at Marsh & McLennan

Sir John Templeton reveals the future
02/24/05   Value Investing
"Templeton sought out the best opportunities anywhere in the world he could find them. When he began investing globally in the 1930s, Templeton was truly a pioneer. Many Americans thought it unwise to invest outside the United States and therefore forfeited a world of opportunities. John Templeton's results, however, are the stuff of legend."

A worthy successor's worldly views
02/22/05   Value Investing
"Statistically, the best values today are in South Korea, but because South Korea is next to North Korea and has some corporate-governance issues, we don't want to have too much there. The net cash per share of some of the smaller companies there is equal or higher than the market capitalization, so you get the business for free. There is also pretty good value in Japan, which on average trades at 8.2 times after-tax cash flow. What Europe has going for it is that there's still somewhat of a valuation gap between small and big stocks. Small stocks in Europe often are ignored by local institutional investors, which provides opportunity for us."

Dull, but worthy
02/17/05   Value Investing
"There's an important lesson here for investors in stocks. As a shareholder, you should always think of yourself as an owner, or a partner, in a business. "Focus on companies, not stocks," writes one of my favorite sages, H. Bradlee Perry of Babson Capital Management. The businesses that produce American millionaires deserve your attention. Dull, in other words, is good."

Emotion, neuroscience and investing
02/02/05   Value Investing
"It is the long-term investor, he who most promotes the public interest, who will in practice come in for the most criticism... For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion -- John Maynard Keynes"

Fund manager focuses on worn stocks with potential
02/01/05   Value Investing
"A bargain hunter, Rodriguez looks for beaten-up stocks with potential to turn around. At the heart of his philosophy is the question, "Am I being compensated for the risks I perceive in this investment?" If the answer isn't "yes," he looks elsewhere - even if that means parking money in cash or money market securities."

Interview with Tim McElvaine
01/21/05   Value Investing
"I think most people can come up with 10 reasons to own a stock. The key is instead to come up with the 2 or 3 key reasons to own a stock. Less equals more."

Manager Monitor: Richard Howson
01/21/05   Value Investing
"A long-time value investor and manager of the $337.2-million Saxon Stock, Richard Howson uses a three-pronged process to identify and profit from attractive companies."

Legg Mason Forum
01/20/05   Value Investing
"I'd like to turn it over to the panel now. But first, here's a picture taken last week of Bill Miller with Paul Samuelson, the Nobel Prize winner from 1970, who is still active at Harvard at the impressive age of 90. Bill had the honor to be the keynote speaker at Harvard's annual Behavioral Finance Conference. Bill went to the first one about a decade ago, at which Charlie Munger was one of the speakers. Samuelson gave the keynote that night. He got up in front of the audience and told them that he had studied a lot of investors and they don't do what they say they do. He didn't doubt that they were good investors; but he argued that what they say they do is not what they're actually doing. So Bill got up to talk with a bit of trepidation, knowing that Samuelson was in the audience."

Oakmark Q4 commentary
01/13/05   Value Investing
"I could see my son's relief: after years of frustration from a father's job that was difficult to understand, much less explain, finally a payoff. Since this is Dad's profession, he can help me win the contest!"

Tastes, distress, and jocks
01/13/05   Value Investing
"Decades of empirical research using almost any balance-sheet metric you care to shake a CRSP shtick at yield the same monotonous result: value stocks have higher returns than growth stocks. It doesn't matter when-pre-Compustat or post-Compustat-and it doesn't matter where, whether in the U.S., other developed nations, or in emerging markets. While this concept was a tough sell in the late 1990s, anyone arguing against it now will wind up buried under a mountain of affirmative data, to say nothing of recent returns."

Requiem for a brewer
01/06/05   Value Investing
"In this View from Burgundy, we will examine the latest pratfall in Molson's history. While it is modestly instructive on a stand-alone basis, we would also like to draw some broader conclusions about diversification from this sad tale. We will conclude by giving a shareholder's view of how management should invest the cash flow from a superior business."

Schloss archives for value investing
01/05/05   Value Investing
"The Walter Schloss Investing Archive provides historical resources for scholars and showcases the unique history of the value approach."

Fund legend Gabelli shares insights, lessons
12/07/04   Value Investing
"Similar to one of his heroes, Warren Buffet (see below), Gabelli was a disciple of the investment approach taught by Graham and Dodd. He shared a clip of a series of lectures he had recorded from his former Professor at Columbia University in the 1970s discussing the concept of "Private Market Value." "Was private market value merely intrinsic value dressed up to make it more appealing?" The difference was that Private Market Value equaled intrinsic value plus a control premium. Valuation of companies using this concept is now the basis for the way Gabelli researches each stock."

Pickings remain slim for FPA's Rodriguez
12/01/04   Value Investing
"Overall, the funds are run with a value orientation, though Rodriguez is the biggest cheapskate of the bunch. And unlike many shops which aim to remain fully invested in the market regardless of the conditions, FPA managers aren't afraid to build big cash stakes if they're unable to find attractive values."

Value skeptics
11/30/04   Value Investing
"Of course, it's very easy to talk about waiting and having patience, but it's very hard to actually do that. Many feel guilty or unproductive when they're not doing something. Their mind set is geared to change. Buffett tries to soothe the restless anxiety of some by saying that one of the wonderful things about the investment game is that you don't have to be right on everything. You only have to get a good idea every year or two. If you're right on a very few things in your lifetime, you can do very well as long as you never make big mistakes. As he's said many times, you just have to wait for the fat pitch."

The Third Avenue Management investor conference
11/23/04   Value Investing
"We were pleased therefore to have the opportunity to hear from four notable value investors including Marty Whitman, Chris Browne, Jean-Marie Eveillard and Mario Gabelli at a recent event in New York City."

Oddball investing
11/18/04   Value Investing
"It all started with Forrest Berwind "Bill" Tweedy in 1920... Bill was a strange fellow. No one really knows where he came from or when he was born. And if you saw him today, you would probably laugh. The man wore suspenders, had a bushy mustache and a good-sized potbelly. He never married or had kids. He ate lunch at the same place at the same time every day. He was an oddball, to put it bluntly. And if you happened to walk past 52 Wall Street, chances are, you would see Tweedy working at his cluttered desk - busy writing letters and looking through company reports."

Veteran value manager took a big risk
11/15/04   Value Investing
"In recent years, mutual-fund manager Jean-Marie Eveillard went from being revered, to reviled, then back to being revered againall without changing his self-described "quirky" investment strategy."

Patient Capital Management Q3
11/09/04   Value Investing
"Many would be surprised to learn that the TSX Composite Index is extremely concentrated in just three sectors. Approximately seventy per cent of the TSX Composite Index is comprised of three industry groups; Energy at 18.5%, Materials at 17.5% and Financials at 33%. For those expecting diversification this index is not it! Canadian investors are unwittingly incurring this "concentration risk" through index funds and active money managers who mimic the index."

The best way to buy dividends
11/07/04   Value Investing
"A stock with a growing dividend is the investment of a lifetime. Own the shares of a company that regularly increases its dividends and you put yourself in a position to receive an ever-growing flow of income and benefit from a rising share price. The total return possibilities over a long period of time are just amazing."

Unorthodox approach builds a winner
10/23/04   Value Investing
"Mr. Michael's investment approach is bottom-up and purely value-driven, with no strictures on company size. "We're an all-cap deep value fund," he says, adding hard work and a focused perspective are keys to the fund's success."

Searching for rational investors in a perfect storm
10/21/04   Value Investing
"In 1991, I wrote a book, Sense and Nonsense in Corporate Finance, in which I set out several criteria for selecting fund managers. The secrets haven't changed. Funds should (a) hold no more than 20 stocks; (b) hold their stocks on average for at least two years; c) eat their own cooking, i.e., the managers should personally invest in the fund, and of course (d) invest on Graham-and-Dodd principles"

Interlopers on the value-stocks turf
10/19/04   Value Investing
"Studies have shown that the most relatively undervalued 10 percent of stocks have outperformed the most expensive 10 percent by more than 10 percentage points annually. The problem is that value stocks can also suffer from long periods of underperformance. Michael Hughes, portfolio manager of the JPMorgan Fleming Europe Strategic Value fund, said that value stocks underperformed the market about 35 percent of the time. "Many investors do not have the patience to live though a long downturn," he said. Also, when value investing is in vogue, it can be more difficult to find genuine value plays."

Value Hunting
10/09/04   Value Investing
"Columbia students bet on ugly ducklings"

Why the sidelines are looking good to managers
08/15/04   Value Investing
"Anyone who wants insight into the stock market but has no interest in parsing technical trend lines may want to consider this simple fact: Some of the most successful value stock fund managers have moved a large portion of their assets off the playing field. While the average stock fund has just 5 percent or so of its assets in cash, Robert L. Rodriguez, manager of the FPA Capital fund, currently has a 39 percent cash stake, while Mason Hawkins and his co-managers at the Longleaf Partners fund are at 29 percent. James Gipson and his team at the Clipper fund are 27.5 percent in cash."

Identifying franchises
08/13/04   Value Investing
"So I think the answer is that franchises are different now, but I don't think they're any less present. And people aren't as good at managing them. So the irony is that where these franchises are concerned, where you've got a dominant market position, that in a global world -- because it's almost impossible to dominate big global markets (the example people got undermined are the auto companies) -- but in a big global world, you have to think locally. Because the only markets that you're going to be able to dominate are local markets."

Patient Capital Management Q2
08/09/04   Value Investing
"Although more than four years have passed it seems like nothing has actually changed. Then as now equity returns in the previous year had been in the double digits and stock prices were expected to grow to the sky. Then as now enthusiasm for equities was very high. Investors and advisors were very bullish, mutual fund cash positions were very low and market commentators were touting the promise of long-term equity returns. As well, surprisingly nothing has really changed with respect to the price levels of the major North American indices. They are at essentially the same levels today as in the summer of 2000."

Value Investing 101
08/09/04   Value Investing
"Warren Buffett and Walter Schloss are not the typical guest lecturers at a business school class. Then again, the Columbia University Graduate School of Business isn't just any business school, and professor Bruce Greenwald's class is anything but ordinary. Greenwald teaches Columbia's value investing course and also authored a book on the topic. In part one of this five-part series, Greenwald shares with Fool contributor Matt Logan the three steps of value investing."

Lots of cash, little to buy
07/22/04   Value Investing
"What sets the cash-heavy funds apart? Many of them, including FPA Capital Value and Longleaf Partners, are value investors that look for good, and even troubled, companies whose share prices have fallen below their actual worth. These funds found a wealth of opportunities during the sharp market downturn in 2001 and 2002, and reaped rich rewards in the strong recovery last year. But cash positions have ballooned this year as investors continue to throw money at the top value performers despite a chorus of warnings from their managers that prices are now too high and that little fits their criteria."

Keep your eye on a few basics
07/03/04   Value Investing
"Although investing is a subtle and complicated endeavor, everyone can benefit from a simple set of rules and principles."

Insights from the monsters of stock
05/13/04   Value Investing
"Whenever value investors get together to talk about stocks, the usual topics come up: margins of safety, intrinsic value, price/book, and economic moats. While those subjects were raised here as well, there were some new insights I gleaned from listening to the masters speak. Here are a few of them."

In defence of dividends
04/27/04   Value Investing
"Share buybacks may be easily sold to analysts, but do shareholders really win when money is returned to them as BP is proposing to do?"

Why legendary investors are drowning in cash
04/19/04   Value Investing
"By the same token, when several of the very best managers all say they are having an extremely difficult time finding anything to buy at prices that make sense -- not just in the U.S. stock market, but in the bond arena and foreign markets, too -- it's worth paying attention. In fact, it's remarkable how many top-flight managers currently have more than 20% of assets in cash and say they find compelling opportunities scarce to nonexistent."

Russell gains are no small thing
04/10/04   Value Investing
"Towle, a deep-value investor who usually does most of his prospecting among small-caps, says he can't find anything to buy."

Value stocks become more difficult to find
03/31/04   Value Investing
"it's making life increasingly difficult for veteran value-hunters such as John Spears, who helps manage the Tweedy Browne American Value mutual fund in New York. Asked if he can find cheap stocks in this market, Spears doesn't hesitate. "No. None," he says."

The herd mentality - and how to avoid it
03/28/04   Value Investing
"It is amazing how stock investors get taken in by the herd mentality. When markets are surging furiously, everyone wants to buy stocks; when the markets begin to plummet, investors flock to sell their holdings with or without any valid reason."

Clipper annual: amnesia in action
03/26/04   Value Investing
"Four years ago the stock market really divided into two groups - technology and dotcom startups versus everything else. We actually found more cheap stocks then than we find now. Today's rising tide of stock prices has lifted all boats, leaky pirate vessels included."

Spring training for value investors
03/26/04   Value Investing
"The Berkshire Hathaway annual letter is a unique resource for students of value investing. However, this time of year also features annual letters from many other great value investors, providing the opportunity to learn from the market's heaviest hitters."

Some fund managers seek 'deep value'
03/17/04   Value Investing
"A company with great prospects hits hard times, a top executive winds up in court and the stock starts to tank. That's when smart investors run, right?"

A walk on the wild side
03/16/04   Value Investing
"Over the past few years, we at Contra the Heard have tweaked our methodology to emphasize a corporation's margin of safety in the selection process and avoid the crash-and-burn stories. After all, sometimes out-of-favour stocks deserve to be neglected. They are, as described by our friend Norman Rothery, who edits and the Rothery Report, "cigarette-butt" stocks: cheap, easy to pick up, but only okay for a puff or two."

Third Avenue Funds shareholder letters
03/14/04   Value Investing
"the most idiosyncratic letters still come from the fund industry's boutiques. Perhaps the most sophisticated writer is Third Avenue Value's Martin Whitman."

Patient Capital Management Q4
03/11/04   Value Investing
"We are not convinced that the strong growth registered in the latter stages of 2003 and expected to continue into the current year is sustainable. We remain concerned about weak employment growth in the U.S., low capacity utilization rates and unprecedented amounts of debt at all levels of the economy. The very large trade and current account deficits that have led to a rapid decline in the value of the U.S dollar also pose a serious risk. More importantly, our analysis of many companies gives rise to concerns over the quality of earnings, capital structures and valuation levels. Indeed, valuation levels during the previous market bottom did not approach those of earlier bear markets and today's valuations are still considerably above long-term historical averages."

Maida one heretic worth heeding
03/10/04   Value Investing
"While almost everyone else is enthusiastic about stocks -- Canadians bought an astounding $5-billion in mutual fund units in February, the industry's biggest month in four years -- he could hardly be less bullish. The cash is piling up again, for the simple reason that Mr. Maida can hardly find a single stock that he likes."

Dinner and tips
02/28/04   Value Investing
"Tilson, nevertheless, is a curmudgeon -- a young curmudgeon. He is part of an informal gang that's often called Graham-and-Doddsville, after the two financial geniuses Benjamin Graham and David Dodd, who in 1934 wrote the classic book "Security Analysis," which urged investors to "look for a margin of safety" when they bought stocks."

Investors can be their own worst enemy
01/25/04   Value Investing
"Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

Buffettesque Superinvestors
01/24/04   Value Investing
"Whitney Tilson talks about 12 up-and-coming, mostly unknown investment managers whom he believes will substantially outperform the market over time. They manage money in very different ways, but all are from the intellectual village of Graham-and-Doddsville. Individual investors stand to learn a thing or two from them."

Dig deep for hidden value
01/17/04   Value Investing
"The trick to value investing is to buy good companies when nobody else wants them, which requires a strong contrarian streak -- and buckets of patience. It is not a game for day traders or investors with weak stomachs."

A scary time for stocks
01/09/04   Value Investing
"So, without further ado, my opinion on these three factors is quite bearish. In contrast to the current cheery consensus, I think that the economy is not as strong as it appears, interest rates have nowhere to go but up, and high stock valuations already reflect a best-case scenario, so there's little upside and substantial downside."

Value Investing by Damodaran
01/03/04   Value Investing
"Value investors are bargain hunters and many investors describe themselves as such. But who is a value investor? In this chapter, we begin by addressing this question, and argue that value investors come in many forms. Some value investors use specific criteria to screen for what they categorize as undervalued stocks and invest in these stocks for the long term. Other value investors believe that bargains are best found in the aftermath of a sell-off, and that the best time to buy a stock is when it is down. Still others adopt a more activist approach, where they buy large stakes in companies that they believe are under valued and push for changes that they believe will unleash this value."

Value Investing overview by Damodaran
01/03/04   Value Investing
"A value investor is one who pays a price which is less than the value of the assets in place of a firm."

A value investor's secret
12/21/03   Value Investing
"Value investors come in all shapes and sizes. Some invest in real estate, others in bonds (generally distressed ones), still others in stocks. Some specialize in certain industries or countries, while others are generalists. But most value investors have two things in common: (1) They seek to buy at a significant discount to intrinsic value (the proverbial dollar bill for 50 cents); and (2) They generally sell once intrinsic value has been reached."

Is there still value in the book-to-market ratio?
12/11/03   Value Investing
"There is one advantage of BtM relative to its peers that should be mentioned. Since book value is a "stock" variable, while earnings, cash flow and sales are "flow" variables, there is a tendency for BtM rankings to be somewhat more stable over time than the rankings based on the other three variables. This reduces portfolio turnover for strategies that are based on BtM rankings. So, in addition to providing at least as much return dispersion as its competitors, BtM may also reduce the number of transactions that are triggered by stocks moving in and out of the portfolio's buy range. This can be especially important for taxable investors."

The value view
12/02/03   Value Investing
"Value managers come in many shapes and sizes. Some are more price focussed and are often drawn to cheap but troubled companies. While a notably larger camp, the GARP managers, conduct an ongoing search for the less typical combination of quality and price. This week is a summary of the opinions and views of what I feel are some of Canada's most skilled money managers."

Market prices right
11/27/03   Value Investing
"So does Miller. His turnover is about 4% a year, meaning that his average holding period is 25 years. For an undervalued stock, the sweet spot is typically three to five years, and that period can include some scary corrections, Miller suggests. Meanwhile, the average mutual fund is turning over its portfolios entirely in 11 months, because, citing a lesson from behavioural economics, "people overwhelmingly overvalue current information," or what the analysts are saying now. Analysts rarely put a stock on their recommended list before it has shown signs of resurrection, by which time most investors have missed a significant portion of the rebound."

To sell or not to sell
11/25/03   Value Investing
"Ah, but all other things aren't always equal. Companies and industries change. New information surfaces. Assumptions can prove to be inaccurate. Stocks often decline for very good reasons, and you might be correct in concluding that there are better places for your capital, even though the stock has become cheaper. The key is figuring out which stocks are mistakes and which represent opportunity. That's not easy, but it is certainly much easier if you can overcome the natural human tendency to irrationality cling to losing stocks."

Munger on human misjudgments
11/25/03   Value Investing
"Behavioral finance -- which examines how people's emotions, biases, and misjudgments affect their investment decisions -- is one of the least discussed and understood areas of investing."

Avoiding value traps
11/25/03   Value Investing
"Companies and their stocks fall on hard times for any number of reasons. Sometimes hard times spell buying opportunities, other times you're better off keeping your distance. The hard part is telling the difference. Whitney Tilson shares some tricks of the trade."

The bull is back!
11/10/03   Value Investing
"It's true. Just ask your local broker. Listen to the cheery business commentators on the television and radio. Better still ask your boy genius fund manager; he too believes that it's true. Listen closely ... all you will hear is bull."

Dividend policy and market movements
10/22/03   Value Investing
"Using S&P 500 monthly returns as a proxy for market conditions, we investigate whether investors prefer dividend-paying stocks to non-dividend-paying stocks in declining markets. We find that dividend-paying firms have higher returns than non-dividend-paying firms, especially in declining markets. These results are robust for adjustments for risk using CAPM adjusted deciles, CAPM excess returns, the Fama-French three-factor model, and dividing the sample into size and book-to-market quartiles. Furthermore, we find that the simple payment of dividends, and not the level of the dividend yield, drives returns' asymmetric behavior relative to market movements, consistent with the signaling hypothesis of dividends."

Tweedy, Browne Annual
05/23/03   Value Investing
"Favorable or unfavorable historical investment results in comparison to an index are not necessarily predictive of future comparative investment results. In Are Short-Term Performance and Value Investing Mutually Exclusive?, Eugene Shahan analyzed the investment performance of seven money managers, about whom Warren Buffett wrote in his article, The Superinvestors of Graham and Doddsville. Over long periods of time, the seven managers significantly outperformed the market as measured by the Dow Jones Industrial Average (the "DJIA") or the Standard & Poor's 500 Stock Index (the "S&P 500") by between 7.7% and 16.5% annually. (The goal of most institutional money managers is to outperform the market by 2% to 3%.) However, for periods ranging from 13 years to 28 years, this group of managers underperformed the market between 7.7% and 42% of the years. Six of the seven investment managers underperformed the market between 28% and 42% of the years. In today's environment, they would have lost many of their clients during their periods of underperformance. Longer term, it would have been the wrong decision to fire any of those money managers."

Patient Capital Management Q1
05/22/03   Value Investing
"Our long-term focus leads to low transaction costs and is tax efficient. These benefits are very tangible and go directly to your portfolio's bottom line return. A very low turnover strategy such as ours is beneficial in many other ways. We do not spend much time on the phone executing transactions. This allows us to focus on analyzing companies and searching for value instead of monitoring the minute-by-minute movement of stock prices. Our investment philosophy allows us to run Patient Capital very efficiently."

Strong selling point
04/27/03   Value Investing
"A company's P/S ratio is simply its market value divided by total annual revenue. A company with a low P/S ratio is experiencing one of two types of selling: the good kind, when it moves more product to pump up the "S," or the other kind, when investors dump its stock, driving down the "P." Either way, if the ratio gets low enough the stock may be a bargain, or at least worth a look."

A conversation with Marty Whitman
02/21/03   Value Investing
"In the final analysis, value investing means being price conscious rather than outlook conscious. You buy what is cheap and safe. Most everybody else is outlook conscious, or price unconscious. But growth investing is a misnomer. When people talk about growth investing, they mean generally recognized growth. We do real growth investing in value, but we don't pay for it. You can't do generally recognized growth without paying for it. Growth investing entails a willingness to pay up front. If you concentrate on growth investing, you concentrate on the outlook, rather than the price. Most people want to buy a stock that will go up; they don't care if it's cheap or not."

Patient Capital Q4
02/19/03   Value Investing
"What we do advocate is that the practice of providing quarterly earnings forecasts and guidance be stopped. This would eliminate the pressure to match or exceed quarterly estimates. The pressure of meeting expectations can lead to short term business decisions at the expense of important strategic considerations."

Buying the wrong stock for the right reason
02/03/03   Value Investing
"We explore whether the Wall Street adage, 'Never catch a falling knife' is advice to be followed under all circumstances."

The ABC perspective
01/09/03   Value Investing
Buying Toonies for Loonies from Irwin Michael

Patient Capital Management Q3
12/14/02   Value Investing
"Ever since the market bubble burst accountants and analysts have been blamed for the huge losses that have been incurred. In our view, investors (particularly institutional investors and mutual fund managers) have nobody to blame but themselves. It is their fiduciary duty to carry out the proper analysis and due diligence before making an investment decision on behalf of the clients who have entrusted their capital to them. To now blame the accounting establishment and brokerage analysts for the losses experienced over the past two and one half years is extremely inappropriate."

Private Capital Management Q3
11/29/02   Value Investing
"The bull market's decline began early in 2000, after the NASDAQ/Internet bubble reached its zenith in March. For some time we had warned of valuation excesses, particularly within the technology sector. Still, the magnitude of the mania seems all the more remarkable in retrospect."

High dividends are now a predictor of growth
11/19/02   Value Investing
"It may seem too good to be true, but companies that pay the highest dividends are also likely to grow the fastest. For years, many finance professors have taught just the opposite. Reinvesting current earnings back into a company is supposed to promote earnings growth. Higher payout ratios are supposed to be followed by lower earnings growth. But research conducted by Robert D. Arnott of First Quadrant and Clifford S. Asness of AQR Capital Management reveals a very different picture. For the overall stock market between 1871 and 2001, corporate profits grew fastest in the 10 years following the calendar years in which companies had the highest average dividend payout ratio. In contrast, the 10-year real earnings growth rate was the lowest following years with the lowest average payout ratios."

Patient Capital 1st Quarter
11/14/02   Value Investing
"The figures provided in the following table show the valuation of the Dow Jones Industrial Average at market lows. Today's valuations are substantially above the average and those of every individual bear market bottom. Just as interestingly, valuations have been far lower than they are today at even lower levels of interest rates."

Running with the 'Dogs of the Dow'
11/07/02   Value Investing
"Just as a contrarian would have predicted, the strategy started working just as disillusionment with it peaked. The formula beat the Dow in both 2000 and 2001. While the jury is still out on this year for the strategy, it is running neck and neck with the blue-chip index itself through the end of this third quarter."

Cognitive biases in market forecasts
11/01/02   Value Investing
"There is no statistically significant relationship between dividend yields and P/E ratios and returns in the subsequent one or two years. The relationship between P/E ratios and dividend yields and stock returns over 10-year periods is much stronger, but it offers far less than perfect reliability."

Boeing's set to fly solo
09/27/02   Value Investing
"Boeing has decided to go it alone in the flight-training business and will buy out Berkshire Hathaway's 50 percent interest in the 5-year-old FlightSafety Boeing joint venture."

Third Avenue's 3rd Quarter Report
09/23/02   Value Investing
"The title of the Op-Ed article said it all - 'Government Can't Make The Market Fair.' I agree. The solution to this problem for OPMIs is to buy in at prices far, far lower than is usually available in negotiated transactions or in purchasing control."

Computer buff follows value faith
08/12/02   Value Investing
The Globe's profile of Buffett follower and creator of The Toronto Investment Club website.

Asset allocation is key for retired chemist
08/12/02   Value Investing
Shakespeare's Globe & Mail profile. Check out his website for more info.

Long live dividend yield
07/23/02   Value Investing
"And at a time when more questions are surfacing about companies' financial procedures, a return to dividend payments and analysis could offer a more accurate portrayal of a company's growth pattern. "

Buffett's emergency quiz
07/22/02   Value Investing
Before selling your stock funds take Warren's quiz.

Double whammy
07/04/02   Value Investing
"The theory goes like this: If the market is dropping, high yielding stocks at least offer high cash flows to offset any decline in value. Nice theory, too bad it doesn't work in real life."

Boom-era valuations are creating fake stock bargains
06/21/02   Value Investing
"To the simple price of stocks and (relatively) low price-to-earnings ratios, you can add price-to-book value to the list of metrics that are down from the peak, but shouldn't automatically be assumed to be attractive."

Third Avenue's semi-annual report
06/05/02   Value Investing
"Those who think of options as an expense have it wrong, at least from the Company and Creditor points of view. Warren Buffett is quoted as saying, 'If options are not a form of compensation what are they? If compensation isn't an expense, what is it? And if expenses shouldn't go into the calculation of earnings, where in the world should they go?' Frankly, the Buffett statement is an overgeneralization, even though most finance academics, and among others, Alan Greenspan, seem to be wholly in concurrence."

Dividends do matter
04/25/02   Value Investing
"What Modigliani and Miller proved perfectly in the 1960s was the proposition that under perfect market conditions, shareholders should be indifferent as to whether a company pays a dividend or retains the cash, since retaining the cash should just directly translate into future dividends. And of course, we have a perfect market. Everybody translates everything, sees through the way everything's expressed. There isn't any accounting fraud anywhere. There are no problems. The whole thing works beautifully. All is wonderful. Until you meet the real world."

Third Avenue Funds Q1 Report
04/11/02   Value Investing
"There is plenty of blame to go around for the apparent accounting frauds that led to Enron Corporation filing for relief under Chapter 11 of the U.S. Bankruptcy Code. In assessing blame, though, it would be a shame if conventional security analysts, conventional money managers and conventional finance academics were left out of the mix. Whatever their other talents - and these people tend to have many other talents - analysts, money managers and finance professors seem notoriously unqualified to be intelligent, responsible users of GAAP who actually understand the uses and limitations of financial statements." [PDF]

Loving the unloved
04/11/02   Value Investing
"James generally sticks to the microcap arena - which includes stocks with market caps of $300 million or less - and zeroes in on companies that have been neglected by both analysts and the stock market. He favors firms that were former market favorites but have encountered short-term difficulties. "

Study links profit to dividends
02/25/02   Value Investing
"Throughout the booming 1990s, dividends fell out of favour as investors turned their focus to rising stock prices and juicy capital gains. Corporate North America convinced investors that profits were best spent expanding businesses rather than paying out fat dividends, leading to stronger growth in years ahead. But new financial research argues the opposite is true; that low dividend payouts lead directly to poor profit growth."

The great eight
01/25/02   Value Investing
"The goal was to find companies with sound fundamentals - and not necessarily rapid earnings growth - for investors with long time horizons. According to a study by the Leuthold Group, a Minneapolis research firm, a $10,000 investment in large-company growth stocks in 1974 would be worth $405,500 today. That's impressive, but consider this: If you had put the same amount in large-cap value stocks, you'd have $639,200."

Ten lectures by Benjamin Graham
11/27/01   Value Investing
"These lectures are from the series entitled Current Problems in Security Analysis that Mr. Graham presented at the New York Institute of Finance from September 1946 to February 1947."

The virtues of value investing
11/16/01   Value Investing
"A classic, according to Mark Twain, is a book that people praise and don't read. Let's be honest: For most of us, Security Analysis, the 1934 classic on value investing by Benjamin Graham and David Dodd, falls into that category." What!?!? Security Analysis is one of the best investment books that I've ever read. Ask Santa for a copy this Christmas and you won't be disappointed.

The allure of dividends
11/02/01   Value Investing
The Fool's chat about why high dividends are a good thing and make a couple picks.

Value investing guide
10/18/01   Value Investing
The Globe has just posted its third annual value guide which contains all sorts of useful data for stingy investors.

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