Fortunes in Special Situations in the Stock Market: The Authorized Edition

Fortunes in Special Situations in the Stock Market: The Authorized Edition: Forgotten for over 50 years, Schiller is the inventor of special situations investing for obtaining nearly riskless stock profits. Most of his books have been unknown and out of print until now. His life’s work is monumental, on a scale with Graham and Buffett, and applicable to any time – for those willing to put in the hours. Includes case studies of live situations today.

Schiller (1901-1994) left Dartmouth and landed on Wall Street in 1922, just in time to watch shady practices and heedless risk end in the crash and Great Depression. This experience led him to choose his life’s work: practice and study of special situations, designed to avoid risk for clients. Beginning in the 1930s, he invented new and refined existing special situations so the investor could experience almost riskless gains and avoid the devastation of the Great Depression again.

Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors

Concentrated Investing Cover

Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (Wiley Finance, 2016) chronicles many virtually unknown—but wildly successful—value investors who have regularly and spectacularly blown away the results of even the world’s top fund managers. Sharing the insights of these top value investors, expert authors Allen Benello, Michael van Biema, and Tobias Carlisle unveil the strategies that make concentrated value investing incredibly profitable, while at the same time showing how to mitigate risk over time. Highlighting the history and approaches of four top value investors, the authors tell the fascinating story of the investors who dare to tread where few others have, and the wildly-successful track records that have resulted.

Turning the notion of diversification on its head, concentrated value investors pick a small group of undervalued stocks and hold onto them through even the lean years. The approach has been championed by Warren Buffett, the best known value investor of our time, but a small group of lesser-known investors has also used this approach to achieve outstanding returns.

  • Discover the success of Lou Simpson, a former GEICO investment manager and eventual successor to Warren Buffett at Berkshire Hathaway
  • Read about Kristian Siem, described as “Norway’s Warren Buffett,” and the success he has had at Siem Industries

Concentrated Investing will quickly have you re-thinking the conventional wisdom related to diversification and learning from the top concentrated value investors the world has never heard of.

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From the Inside Flap

If you’ve studied value investing, some of the names in this book may be familiar, but the majority probably won’t be. Nonetheless, they are a who’s who in concentrated value investing, each with their own unique story, skillset, and philosophies that have gained them tremendous wealth and accomplishment while flying below the radar—until now. Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors takes you inside the ledgers and playbooks of this select group of history’s elite value investors to uncover their secrets for the new generation of wealth builders.

Turning the practice of diversification on its head, concentrated value investors purchase a small group of undervalued stocks and hold them through the highs and lows of the long term. You will read a lot about the juggernaut of value investing, Warren Buffett, who amassed the legendary Berkshire Hathaway with this approach. But this motivating book shows you he wasn’t the first or only one. This eye-opening examination will have you re-thinking conventional wisdom on asset allocation and emulating such concentrated value investors as:

  • A former GEICO investment manager whom Buffett has named “a cinch to be inducted into the investment hall of fame”
  • Kristian Siem, who grew Siem Industries at 25.6% annually over the past twenty- five years by following two key principles
  • Edward Thorp and the formula he trusted to risk $662.5 million on to collect just $2.5 million in a rare opportunity
  • Trends, momentum, volatility, and volume all change day to day and create opportunities to pick up the undervalued stocks that grow into fortunes, as you’ll see in Concentrated Investing.

From the Back Cover

Praise for Concentrated Investing

MARIO GABELLI, CEO and founder, Gabelli Asset Management:

Concentrated Investing may not be for all fiduciaries but the principals highlighted in this book—such as Lou Simpson whose career I have tracked since his days at Shareholders Management to Berkshire Hathaway—underscore this proven approach to long term investing. Pick your best stocks and have concentrated holdings—just as Warren Buffett has done at Berkshire Hathaway.

JEAN-MARIE EVEILLARD, Senior advisor and former PM of the First Eagle Funds:

I used to run mutual funds, so I did not have permanent sources of capital (in the late 1990s, I lost 7 out of 10 shareholders in less than 3 years). Too bad, because I agree that risk is not volatility, it is the risk of permanent loss of capital. And, yes, it is hard to move away from the herd, but hey, most good things in life come hard. So, as this book suggests, in my next life, I will run a closed-end fund and have a concentrated portfolio.

CHARLES ROYCE, CEO and founder, The Royce Funds:

This is more than a book…it is a detailed compendium of the life and temperament of the greatest concentrated investors…the Simpson and Keynes stories are terrific testimonies to both their practice and their learnings over time…the stories of Simpson and Keynes alone…are worth the book price X 100.

CHARLES BRANDES, CEO and founder, Brandes Investment Partners:

The pervasive investment world definition of ‘risk’ today is price volatility. This book reminds us that this definition is a fallacy for true investors. It demonstrates that intelligent concentration is the ideal investment philosophy.

ALAN KAHN, CEO and cofounder, Kahn Brothers & Co. (Retired):

We all know of ‘the World’s greatest investor,’ Warren Buffett, but how many of us know the man whom Mr. Buffett chose to do HIS portfolio investing, Lou Simpson, who managed the vast portfolio of Berkshire Hathaway’s insurance subsidiary GEICO? The brightest stars, like Benjamin Graham, can be seen with the unaided eye. But this book trains the telescope on the less explored parts of the investment skies and provides us with the secret to success: run concentrated portfolios with permanent capital to prevent against capital withdrawals just at the depressed times when bold investment action is called for. Read! Enjoy! And get richer!

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Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations (Wiley Finance)

Amazon Best Seller Corporate GovernanceDeep Value #1 Best Seller

“If You’re A Pro On Wall Street Just Shut Up And Read This Book.”

Here’s your book for the fall if you’re on global Wall Street. Tobias Carlisle has hit a home run deep over left field. It’s an incredibly smart, dense, 213 pages on how to not lose money in the market. It’s your Autumn smart read.

–Tom Keene, Bloomberg’s Editor-At-Large, Bloomberg Surveillance, September 9, 2014.

This is a book about deep value, the reason activist investors and other contrarians seek out losing companies. Deep value is investment triumph disguised as business disaster. It is a simple, but counterintuitive idea: Under the right conditions, losing stocks—those in crisis, with apparently failing businesses, and uncertain futures—offer unusually favorable investment prospects.

This is a philosophy that runs counter to the received wisdom of the market. Many investors believe that a good business and a good investment are the same thing. Many value investors, inspired by Warren Buffett’s example, believe that a good, undervalued business is the best investment. The research offers a contradictory view.

This book is an investigation of the evidence, and the conditions under which losing stocks become asymmetric opportunities, with limited downside, and enormous upside. It is intended to be a practical guide that canvases the academic and industry research into theories of intrinsic value, management’s influence on that value, and the impact of attempts to unseat management on both market price and value.

As a portfolio, deeply undervalued companies with the conditions in place for activism offer asymmetric, market-beating returns. Activists exploit this property by taking large minority stakes these stocks and then agitating for change. What better platform than a well-publicized proxy fight and tender offer to highlight mismanagement and underexploited intrinsic value, and induce either a voluntary restructuring or takeover by a bigger player in the same industry?

We’ll see how activist investing can be understood as a form of arbitrage. Activists invest in poorly performing, undervalued firms with underexploited intrinsic value. By remedying the deficiency, or moving the company’s intrinsic value closer to its full potential, and eliminating the market price discount in the process, they capture a premium that represents both the improvement in the intrinsic value, and the removal of the market price discount. We scrutinize the returns to activism to determine the extent to which they are due to an improvement in intrinsic value, or simply the returns to picking deeply undervalued stocks. Finally, we examine valuation metrics used to identify the characteristics that typically attract activists—undervaluation, large cash holdings, and low payout ratios. These metrics favor companies with so-called lazy balance sheets and hidden or unfulfilled potential due to inappropriate capitalization. Activists target these undervalued, cash-rich companies, seeking to improve the intrinsic value and close the market price discount by reducing excess cash through increased payout ratios. We analyze the returns to these metrics, and apply them to two real world examples of activism. The power of these metrics is that they identify good candidates for activist attention, and if no activist emerges to improve the unexploited intrinsic value, other corrective forces act on the market price to generate excellent returns in the meantime.

Each chapter tells a different story about a characteristic of deep value investing, seeking to demonstrate a genuinely counterintuitive insight.Through these stories, it explores several ideas demonstrating that deeply undervalued stocks provide an enormous tail wind to investors, generating outsized returns whether they are subject to activist attention or not. It begins with former arbitrageur, and option trader Carl Icahn. An avowed Graham-and-Dodd investor, Icahn understood early the advantage of owning equities as apparently appetizing as poison. He took Benjamin Graham’s investment philosophy and used it to pursue deeply undervalued positions offering asymmetric returns where he could control his own destiny.

Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (Wiley Finance)

Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (hardcover, 288 pages, Wiley Finance, 2012).

In Quantitative Value, we make the case for quantitative value investment in stock selection and portfolio construction. Our rationale is that quantitative value investing assists us to defend against our own behavioral errors, and exploit the errors made by others. We examine in detail industry and academic research into a variety of fundamental value investing methods,and simple quantitative value investment strategies. We then independently backtest each method, and strategy, and combine the best into a new quantitative value investment model.

We begin our investigation by examining two simple quantitative value investment strategies: one suggested by the great value investor and philosopher Benjamin Graham, and the other Joel Greenblatt’s Magic Formula, and ask if there are simple ways to improve upon them. We conduct our investigation along four broad lines:

  1. How to identify and avoid stocks at the highest risk of sustaining a permanent loss of capital, including those exhibiting financial statement manipulationfraud, or financial distress (e.g. bankruptcy)
  2. How to find stocks of the highest quality, which we define as those possessing an economic franchise, and superior financial strength
  3. Which price ratios (e.g. price-to-book value or price-to-earnings) best identify undervalued stocks and lead to the best risk-adjusted investment performance? We look at several unusual implementations of price ratios, including long-term averages and combinations of price ratios
  4. Which signals sent by other market participants identify stocks primed for performance? We look at the impact of buybacks,insider purchasesshort selling, and buying and selling from institutional investment managers and activists.

We examine the best way to structure our findings into a cohesive strategy, and then backtest the resulting quantitative value model. We compare the performance of our quantitative value model with the performance of several well-known value investing mutual funds.

Look Inside

The book can be purchased from Wiley FinanceAmazon, or Barnes and Noble.

Introduction to Corporate Finance Contributor

Tobias contributed the “About Liquidation Value Investing” section to Introduction to Corporate Finance (Third Edition, Wiley, March 2013) by Laurence Booth and Sean Cleary.

Publisher’s Description

Booth/Cleary Introduction to Corporate Finance is the only ground-up Canadian introductory finance textbook on the market.  The text’s authors, internationally renowned researchers, Laurence Booth (University of Toronto), and Sean Cleary (Queen’s), provide students with a solid foundation in the theory and application of corporate finance topics within a uniquely Canadian context.  The authors present complex material in an accessible and applied fashion, which gives students both a strong understanding and an interest in the subject. Booth/Cleary Introduction to Corporate Finance is the only book that will provide students with the skills they need to succeed not only in the undergraduate course, but in their future careers.