Value Investing: Tools and Techniques for Intelligent Investment

James Montier discusses several areas related to value investing. The book is a collection of articles he wrote. The book provides several insights - several of these have been tested for data going back a couple of centuries. Quite a bit of data / analysis overlaps amongst the different articles. 1. The first seven chapters are devoted to showing data and inferences that debunk the efficient market hypothesis. For those who have already bought into this argument, this may be a tad tiring. 2. The next seven chapters discuss theory and practical ways to incorporate behavioral aspects into investment decisions. 3. The third section discusses his philosophy of investing, focusing on process instead of outcomes, becoming aware of confirmation bias, becoming aware of action bias, and need for skepticism. 4. The fourth section validates value investing approaches by analyzing data from companies across the globe. 5. The fifth section deals with shorting from a value investing perspective. Past results in this section are the least compelling compared to the other sections. 6. The final section is a collection of articles analyzing financial events as they unfolded over the last couple of years around the globe. The book could have been shorter if articles were combined into a cogent book form. We would, however, lose real-time aspects of analysis as events unfolded.

I have always liked reading James Montier, his work generally helps one remember to take a step back and assess objectively from all angles whatever one is analysing. This book is a collection of essays written leading up to and during the financial crises we have been witnessing. Despite his continual claims that investors are unable to time markets with any consistency, the number of times in which the author seems to be able to do so gives some pause for thought. The book is a nice mixture of case evidence of major human biases as well as investment themes that hold true by hanging on to simple consistent measures. The behavioral investment biases we all have are too numerous to state, but the author always does a remarkable job of reminding us that, they are always with us. These identifications and experimental evidence of our various cognitive biases are always fun to read, one often finds themselves falling into the same buckets as those who are making those "categorical" errors. The use of case examples is not without imperfection though as there are definitely some cases presented for which either the case does not correspond to a financial example or the case is a poor case study to begin with. As a quick example there was a scenario given in which a football(soccer) coach suffered a horrendous defeat and then played a subsequent game and either won or lost, and the audience was asked how the coach would feel in these two situations depending on whether he had changed the strategy after the first defeat, the audience tilted towards saying the coach would feel worse on the second defeat had he not changed the squad. This was then used towards arguing that people use results as the means of judgement rather than process. Had the experiment been roulette black/red bets, yes, for a 90 minute match suffering a massive defeat implies a process error. Anyway, minor issue, but every so often the points dont necessarily follow from the examples. The investment theses of the book are very fun to read. The author is very vocal about the need to have simplicity at the heart of ones investment thesis, using a larger and larger set of variables generally does not improve predictive ability, in fact the author believes that information overload reduces predictive ability. He generally argues for the long run return of value over growth and backs it up with simple screening and subsequent return profiles of going long value short growth. One of the more remarkable results, though implicit in the previous sentance, was when the author discusses the negative correlation of GDP growth and stock market returns, ie the faster the economies were growing, the worse their equity returns (meaning that people's expectations tend to run ahead of reality). Slightly isoteric, but the the authors article on dividend swaps was perfect timing and an excellent call on a versatile hedge to many states of the world. All in all, great reading. It was re

I've read tons of value investing books and this one definitely ranks near the top. He uses a bunch of psychological examples of why certain inefficiencies exist. I highly reccommend it.

Montier's collection of essays provides a solid foundation for thinking and reasoning through your investment selections. It provides the reader with foundational understanding and application of Graham & Dodd for contemporary times. The roots in G & D and human (and crowd) psychology formed a base for the application of Value Investing principles to insinuate where you are in the market cycle. His emphasis on working with the known versus unknown (making predictions about the future price movements) is both blatant and necessary. There are numerous references to one of his earlier books littered through every article/chapter... was the repetition supposed to make me purchase it?...a repetitious shameless plug... maybe it's working! Great book. Buy it. Read it. Apply it.