The Art of Value Investing: How the World's Best Investors Beat the Market
Wiley edition confirmed elsewhere.
Summary
Tilson and Heins, who publish Value Investor Insight, assembled quotations from interviews with a large number of value investors and organised them by topic rather than by person.
The topics follow the investment process: developing a philosophy, generating ideas, assessing business quality, evaluating management, judging valuation, building a portfolio, sizing positions, managing risk, deciding when to sell, and handling mistakes and emotion. Within each, the book presents what many different practitioners said about the same question.
The format's value is that the disagreements are visible. On concentration versus diversification, on whether to meet management, on how much macroeconomic view to hold, on holding cash, and on when to sell, experienced practitioners with good records take opposing positions, and seeing that laid out is more instructive than any single manager's prescription. The areas of agreement, principally on temperament, on independence from consensus, on process discipline and on the necessity of a written thesis, stand out because of the contrast.
The contributors include a wide range of managers, most running concentrated long-biased equity strategies.
The book has no argument of its own and no analysis connecting the quotations. It is a compilation, and the selection is of investors with good records, so survivorship applies throughout. Its use is as a survey of how the same questions are answered differently by capable people, which is a useful corrective to seeking a single correct method.
Key takeaways 7
- Experienced value investors with good records take opposing positions on concentration, on meeting management, on holding cash and on when to sell.
- The absence of a single correct method is the most useful finding, since it means an approach must fit the person applying it.
- Practitioners agree far more on temperament and process discipline than on any analytical technique.
- A written investment thesis stating what would refute it is the practice most consistently recommended across different approaches.
- Selling is the least developed part of most investors' process and the one they report getting wrong most often.
- Independence from consensus is described as a temperament rather than a technique, and most practitioners doubt it can be acquired.
- The contributors were selected for having good records, so survivorship applies to every position expressed in the book.
Who should read it
Investors who want to see how capable practitioners answer the same process questions differently, as a corrective to seeking one method.
About Whitney Tilson
Founder, T2 Partners and Kase Capital 1999-2017; founder of Empire Financial Research; now lead editor, Stansberry Research
A prolific popularizer of value investing whose Art of Value Investing outlived its news cycle, though his own fund record was mixed and ended in 2017.
Stansberry Research, Empire Financial Research, T2 Partners, Kase Capital
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