Foreword
Preface
Chapter 1: A Highly Personal Endeavor: What Do You Want to Own?
Give Your Money to Warren Buffett, or Invest It Yourself?
Cast Yourself in the Role of Capital Allocator
Role versus Objective: A Subtle but Important Distinction
The Buck Stops Here
The Scale of Investments: How Much is a Billion Dollars, Really?
Owner Mentality
Adopting the Right Mindset
Stock Selection Framework
Key Takeaways
Notes
Chapter 2: Deep Value: Ben Graham-style Bargains
Inelegant but Profitable Strategy of 'Cigar Butt' Investing
The Approach: Why It Works
Track Record Dating Back to the 'Father' of Security Analysis
Some Companies Are Worth More Dead than Alive
Investors Obsession with Income
Uses and Misuses of Ben Graham-style Investing
The Rewards of Psychological Discomfort
Not a Low-turnover, Long Term-oriented Investment Approach
Beware of Portfolio Concentration in the Land of 'Cigar Butts'
Screening for Graham-style Bargains
Ben Grahams 'Net Net' Screen
Martin Whitmans Modified 'Net Net' Screen
Enhanced Screening: Repurchases, Insider Buying, Shrinking Working Capital Requirements
Value Creation via Buybacks
When Insider Trades Matter Most
The Upside of a Declining Sales Trend
Beyond Screening: Working Through a List of Deep Value Candidates
Adjusting Balance Sheet Values in a Liquidation Scenario
Companies at Cyclical Lows versus Those in Secular Decline
Oxymoron or Opportunity: 'Net Nets' With Non Capital-intensive Businesses
Asking the Right Questions of Graham-style Bargains
Is Value Growing, Staying Flat, or Shrinking Over Time?
Is Liquidation Value Really Much Higher than Market Value?
What is the Catalyst to Unlocking Value?
Key Takeaways
Notes
Chapter 3: Sum-of-the-Parts Value
Investing in Companies with Excess or Hidden Assets
The Approach: Why It Works
Uses and Misuses of Investing in Companies with Overlooked Assets
Is an Identifiable Asset Really a Separate Asset?
What Is the Catalyst to Unlocking Non-core Value?
Is the Offer 'Buy One Get One Free' or 'Buy Ten Get One Free'?
Screening for Companies with Multiple Assets
Companies with Multiple Operating Businesses
Companies with Large Holdings of Net Cash
Companies with Investments in Other Companies
Companies with Large Real Estate Holdings
Beyond Screening: Proven Ways of Finding Hidden Assets
Scrutinizing the Holdings of Smart 'Investor-detectives'
Combing Through Areas of Specific Opportunity
Thrift Conversions
Retail or Hospitality Businesses with Large Real Estate Holdings
Companies with Large NOL Carryforwards
Finance Companies Masquerading as Product Businesses
Conglomerates
Building a 'Watch List' of Companies with Hidden Value
Asking the Right Questions of Companies with Hidden Assets
To What Extent Are the 'Hidden' Assets Really Overlooked?
What Is the Investment Case without the Non-core Assets?
What Is the Path to Value Capture?
Key Takeaways
Notes
Chapter 4: Greenblatts 'Magic' Search for Good and Cheap Stocks
The Approach: Why It Works
The 'Magic' of Making Money
The 'Magic' of a Low Price
Future Outperformance: Not Guaranteed, But Likely
Uses and Misuses of Investing in 'Good' and 'Cheap' Companies
Know Thyself (and Know Thy Clients)
Diversification versus Concentration
Leave it or Tweak it?
Screening for Good and Cheap Companies
Replicating Greenblatts Winning Screen
Replacing the Rear-view Mirror with Consensus Estimates
Going International
Beyond Screening: Hope for Improvement Springs Eternal
Throwing Out Capital-intensive Businesses
Whats the Right Way to Account for Brand Value?
Non-linear Ways of Combining 'Good' and 'Cheap'
Asking the Right Questions of Greenblatt-style Bargains
How Durable Is the Firms Competitive Advantage?
Opportunity to Reinvest Capital at High Rates of Return?
How Good Are Managements Capital Allocation Practices?
Are There Any Disqualifying Factors?
Key Takeaways
Notes
Chapter 5: Jockey Stocks
Making Money Alongside Great Managers
The Approach: Why It Works
Uses and Misuses of Investing in Jockeys
Appearances May Be Deceiving
The Compensation Factor
Mind the Attitude
What Happens in the Boardroom
Not All Situations Are Created Equal
Screening for Jockey Stocks
Management Ability
Proxy One: Return On Capital Employed
Proxy Two: Growth of Capital Employed (Per Share)
Proxy Three: Margin Profile
Proxy Four: Asset Turnover
Proxy Five: Capital Expenditure Trends
Management Incentives
Proxy One: Stock Ownership
Proxy Two: Insider Buying Activity
Capital Allocation Ability
Proxy One: Share Repurchases
Proxy Two: Dividends
Beyond Screening: Building a Rolodex of Great Managers
Asking the Right Questions of Management
Key Takeaways
Notes
Chapter 6: Follow the Leaders
Finding Opportunity in Superinvestor Portfolios
Superinvestors Are 'Super' for a Reason
How Superinvestors Add Real Value to Companies
Have Superinvestor Disclosures Been Arbitraged Away?
Uses and Misuses of Superinvestor Tracking
When the Going Gets Tough, Where Is the Conviction?
The Importance of Context: 'Why', Not Just 'What'
Screening for Companies Owned by Superinvestors
Deciding Which Superinvestors to Track'and Which to Ignore
The Superinvestors of Buffettsville
Scouring News and SEC Filings for Superinvestor Activity
Honing In On High-conviction Ideas
Beyond Screening: What Makes a Company Attractive to Superinvestors?
One Step Ahead: Anticipating Superinvestor moves
Know Your Superinvestors ' Defining Style Buckets
Does It Ever Pay to Go Against Superinvestor 'Herds'?
Key Takeaways
Notes
Chapter 7: Small Stocks, Big Returns?
The Opportunity in Underfollowed Small- and Micro-Caps
The Approach: Why It Works
Sources of Inefficiency in Small-cap Investing
Steering a Speedboat Rather Than a Cruise Ship
The Numbers Dont Lie: Small is Beautiful
Uses and Misuses of Investing in Small Companies
The Underfollowed-equals-inefficient Fallacy
A Chance to Know What You Own
If You Might Need the Money, Mind the Liquidity
Screening for Promising Small- and Micro-Caps
Removing the Chaff with a Basic Investability Screen
Zeroing In On 'Investable' Companies Meeting Specific Criteria
Sample Stock Screen: Deep Value
Sample Stock Screen: Activist Targets
Sample Stock Screen: Margin Upside Potential
Sample Stock Screen: Growth At a Reasonable Price
Beyond Screening: Other Ways of Finding Compelling Small- and Micro-Cap Ideas
Big to Small, Small to Small, or Small to Big: Where Is This Company Going?
Hidden Inflection Points, and How to Uncover Them
PT Indosat Case Study: Hitting a Mobile Penetration Inflection Point
Meadow Valley Case Study: Growth Business Masked by Legacy Losses
Asking the Right Questions of Small-Cap Prospects
Did a Company Pass the Right Screen for the Wrong Reason?
Do the Financial Statements Raise Any Red Flags?
Who Has Been Buying and Selling the Shares?
What is Managements Attitude Toward Outside Shareholders?
Where Are the Shares Relative to Their Historical Range?
Moving On to the Subjective Qualities of a Business
Key Takeaways
Notes
Chapter 8: Special Situations
Uncovering Opportunity in Event-Driven Investments
The Approach: Why It Works
The Rewards of Obscurity
Informational and Analytical Inefficiencies
Uses and Misuses of Investing in Special Situations
The Danger of Robotic Analysis
Timing As a Driver of Annualized Returns
Positive Spillover Effects
Uncovering Special Situations
'Hacking' Traditional Screeners to Identify Special Opportunities
Other Ways of Building a Pipeline of Event-driven Ideas
A Step Ahead: Uncovering Equities That May Become Special Situations
Asking the Right Questions of Special Situations
What Is the Source of Potential Inefficiency?
What Is the Margin of Safety?
What Is the Path to Value Creation?
Key Takeaways
Notes
Chapter 9: Equity Stubs
Investing (or Speculating?) in Leveraged Companies
The Approach: Why It Works
Uses and Misuses of Investing in Equity Stubs
Avoiding Biases
Who Owns the Debt?
When the Stars Align
Screening for Equity Stubs
Private Equity in Public Markets
Distressed Equities
Beyond Screening: An Ambulance-chasing Approach
Asking the Right Questions of Equity Stubs
How Vested Is Management in the Common Stock?
Are Business Fundamentals Improving or Getting Worse?
What Is the Nature of the Leverage?
Key Takeaways
Notes
Chapter 10: International Value Investments
Searching for Value Beyond Home Country Borders
The Approach: Why It Works
A Different Animal
The Value of Choice
Uses and Misuses of Investing in International Equities
Dont Assume You Know Who You Are Dealing With
The Pitfalls of Chasing Growth in Emerging Markets
Making Money Amid Challenging Demographic Conditions
Practical Trading Considerations
Clarity Through 'Extremist' Thinking
Screening for International Equities
Go Anywhere or Stick to 'Investable' Markets?
Beyond Screening: Riding the Coattails of Regional Experts
Asking the Right Questions of International Equities
A Question for Europe: How Global Is the Business?
A Question for India: Whats the Right Concentration?
A Question for Japan: Whats an ROE?
Key Takeaways
Notes
References
About the Author
Index.
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