- Hardcover: 424 pages
- Publisher: John Wiley & Sons (23 October 2009)
- Language: English
- ISBN-10: 0470683597
- ISBN-13: 978-0470683590
- Product Dimensions: 17.5 x 2.8 x 25.1 cm
- Average Customer Review: 1 customer review
- Amazon Bestsellers Rank: #1,81,512 in Books (See Top 100 in Books)
Value Investing: Tools and Techniques for Intelligent Investment Hardcover – 23 Oct 2009
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'Any disciple of value investing will benefit greatly from reading this book.' (UK Analyst.com, May 2011).
From the Inside Flap
"James Montier combines a profound understanding of behaviorial finance with a fierce adherence to the tried and tested principles of value-investing. He is always readable, thought-provoking and, above all, correct."
Edward Chancellor, author of Devil Take the Hindmost: A history of financial speculation
"James' latest effort is a must read. It combines great academic and practitioner approaches written in a humorous and entertaining style. It has practical real world examples that don't require advanced mathematics to comprehend. I advise everyone to read and study this wonderful book. All of my students now have Value Investing: Tools and Techniques for Intelligent Investment to add to their required reading."
Mark Cooper, Partner at Omega Advisors & Adjunct Professor at Columbia Business School
"A preponderance of evidence shows that successful long-term investing requires a strong value orientation and a proper temperament, virtues commonly blunted by behavioural and incentive-based biases. Montier, a leading light in value investing and behavioural finance, shows you whats wrong with standard investment thinking and offers important insight into how to improve your process. ReadValue Investing, live its lessons, and prosper."
Michael J. Mauboussin, Chief Investment Strategist at Legg Mason Capital Management, and author ofThink Twice: Harnessing the Power of Counterintuition
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Personally though, I was dissapointed. The first section spells out, in laborious detail, that the markets are not always rational. I'm sure there are a few academics around who disagree, but not many. Other writers made the same points long ago, and I seriously doubt that anyone who would buy a book with "value investing" in the title takes the idea seriously.
The second section is on behavioral economics. He goes over the same fifty or so experiments that every book on the subject seems to cover, and offers no new insights.
The third and fourth sections lay out what he thinks value investing is all about. He's more along the lines of Ben Graham than Warren Buffett, and has little or nothing in common with Marty Whitman, who also wrote a book with the title "Value Investing." (Whitman's book is poorly written, and a much less pleasant read, but ultimately far more insightful and valuable.) Montier is fond of developing numerical models, then back-testing them to see how they would have done over the last 30 years or more. His approach strikes me as a bit naïve. He rails against those who put too much faith in mathematical models based on past performance, then spends a lot of time discussing mathematical models based on past performance. Value investing, as I understand it, is figuring out much something is worth and buying it if you can get away with paying substantially less. Montier pays lip service to this idea, but that isn't really what he advocates in a lot of the book.
The fifth section covers short selling. I found this to be the best section of the book. In brief, he explores the idea that a value investor, when unable to find much that's cheap enough to buy, might want to sell short the most expensive stocks. There's a bit more to it than that, including the basics of looking for problems on the balance sheet, problem CEOs, etc. I wasn't entirely convinced that the risks of shorting the high-flyers are worth the possible gains, but he did provide food for thought. I'll probably read this section again.
The final section is largely a collection of thoughts on what to do when the market crashed in 2008-9. In a word, buy. Frankly, if you're a value investor, you didn't have to be told. A few other topics were covered, but I didn't find anything useful or insightful.
I should also note, as other reviewers have, that the book is repetitive in the extreme. This is largely a collection of articles, with no real effort made to put them together in a cohesive way. In fact, you can probably track down a lot of it on the internet. You'll sometimes find the same sentence, or even an entire paragraph repeated verbatim three, four, or even more times. Several times I thought I might have misplaced my bookmark, but the problem was with the book, not with me. Bruce Greenwald, who wrote the Foreward, views this as an advantage. He's wrong. I should also point out that Montier, though sometimes insightful, at other times just doesn't make sense. For example, he spills quite a bit of ink telling the reader not to forecast. He doesn't admit it, but a lot of his methods (strictly speaking, all of his methods) involve forecasting. I think he's trying to distinguish some sorts of forecasts from others, but he doesn't make this clear, and certainly doesn't offer any convincing argument for this view. Oh, and there are precious few of the "Tools and Techniques" referred to in the subtitle.
One frustrating aspect of this book is that is a compilation of research reports Montier wrote across 2007-09 as a strategist at the French investment bank, Soc Gen; so, it lacks a coherent narrative thrust, and is at times maddeningly repetitive. Also, Montier has a middle school girl's infatuation for the exclamation point! Everything seems worth highlighting! It is exclamatory inflation at its most egregious! Minor frustrations, though, over what is an otherwise insightful and noteworthy book. A nit with the editor more than anybody.
Worth your time, is the way that Montier provides empirical, convincing, and simple evidence for why understanding value investing principles is important for any investor (as opposed to speculator) to understand. Montier, I think successfully, debunks a number of popular investment theories that drive so many investment decisions: CAPM pricing techniques and notions of "beta" and "alpha", market forecasting, growth stock investing, and other common practices of many (retail and institutional) investors. Montier also, like Thaler and others before him, points out how we are all victims of our own biases and of the decision traps our brain architecture always wants to throw us into. To fight these tendencies, a read of this book may help.