Brief Book Review: Deep Value Investing
Posted: Sun Dec 27, 2020 11:57 am
It has been a long while since I've read a book that espouses a judgmental approach to stock selection. For God knows how long I've fallen into the systematic investment camp. Want the market's return? Buy a total stock market index fund. Want to invest by the principles of Benjamin Graham? The Vanguard Global Value Factor ETF largely does the job without all of the leg work. It's often easy for me to forget that the judgmental approach of analyzing a company, chatting with competitors, and consulting with former employees is how I got interested in investing.
The book Deep Value Investing advocates such a judgmental approach but with a quantitative basis. Most value investors these days like to purchase shares at an apparent discount to earning power. The book's author, Jeroen Bos, likes to purchase shares with a less ambiguous margin of safety: a discount to asset values. Bos separates his operations into two distinct buckets:
Of course, my inner academic wants to retain healthy skepticism. How much of Bos's performance explained by the simple value factor? Is he getting superior risk-adjusted return? Are the companies he's invested in actually just riskier? Or are they actual bargains? What's the volatility of the fund? Can we statistically explain his performance by luck?
Be that as it may, I think the book is excellent and well worth reading. It's a simple, straightforward primer on actionable value investing. There are lots of case studies, and the author is even forthcoming enough to talk about his failed investments. Do get your hands on this one if you get the opportunity!
As a value guy myself, I think the circled area of the first picture is going to be how I choose my vacation destinations in the future!
The book Deep Value Investing advocates such a judgmental approach but with a quantitative basis. Most value investors these days like to purchase shares at an apparent discount to earning power. The book's author, Jeroen Bos, likes to purchase shares with a less ambiguous margin of safety: a discount to asset values. Bos separates his operations into two distinct buckets:
- Purchasing shares of companies below book value that still possess some degree of profitability
- Purchasing shares of companies below liquidating value regardless of profitability
Of course, my inner academic wants to retain healthy skepticism. How much of Bos's performance explained by the simple value factor? Is he getting superior risk-adjusted return? Are the companies he's invested in actually just riskier? Or are they actual bargains? What's the volatility of the fund? Can we statistically explain his performance by luck?
Be that as it may, I think the book is excellent and well worth reading. It's a simple, straightforward primer on actionable value investing. There are lots of case studies, and the author is even forthcoming enough to talk about his failed investments. Do get your hands on this one if you get the opportunity!
As a value guy myself, I think the circled area of the first picture is going to be how I choose my vacation destinations in the future!
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