Value Investing: Tools and Techniques for Intelligent Investment

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 repetitive at times due to the combined essay approach rather than focused subject appraoch of the work. The author is always consistent and his conservatism allowed him to buy the markets he had been waiting for to be cheap and avoid the losses most of the crowds had been elusively chasing. His timing was excellent despite having no desire nor confidence in being able to do. The author forcefully argues that that at deep value, yes prices can go against you as they always can, the margin of safety that one has if right manifests itself in short/medium/long term outperformance. Strategies that are used with the goal of making consistent short term returns at the expense of long run value are more likely to be similar to picking up pennies in front of a steam roller.

I purchased this book some weeks ago, but finally had a chance to sit down with it this weekend at a coffee shop. My initial thought before I opened the cover was that it was yet another book on value investing. I would have been thrilled if I gleaned just a little tidbit from this tome. Boy, what an understatement. Montier has written a gem. It is an honor to be the first to post a review on Amazon because I feel like I "discovered" this bookValue Investing: Tools and Techniques for Intelligent Investment is a compendium of the author's pieces and speeches while he was chief strategist at Societe Generale (he is presently at Grantham Mayo according to the dust jacket). For those fortunate enough to have all the author's pieces from his SG days, this book may not be worth purchasing. For those of us who are not so fortunate, this book has more kernels of wisdom on value investing than any book I have read in years.A quick synopsis:Part IMontier debunks much of the academic literature on efficient markets and CAPM. He takes much of the issues Buffett has with modern finance theory and goes into further detail. Unlike many books on value investing which often give a mystical air to the subject of value investing, he backs up many of his assertions with a plethora of data and studies . . . and he doesn't mince words: Chapter Two is entitled CAPM is Cr-p*. Along the way, he provides value investing's definition of risk which is very different from how "modern finance" defines risk, but it is a definition of risk that investors post-2008 can readily identify with. His chapter on the Danger of Discounted Cash Flows echoes the work of Rappaport and Maboussin but does it succinctly in a scant 9 pagesPart IIThis section delves into the area of Behavioral Finance, which I gather has been the topic of his previous three books. The last chapter in this section addresses why value investing is so hard for many investors to implement and hence its continuing source of advantage for those who can overcome the psychological hurdles.Part IIIThis section covers the philosophy of value investing. His "Ten Tenets of his Investment Creed" should be taped as a list to every value investor's computer screen.Part IVThis section focuses on empirical evidence from overseas and applies an old formula from Benjamin Graham's playbook to global markets.Part VThis section is unique among books on value investing in my opinion. It is devoted to short-selling. He provides a methodology and framework to finding short-sale candidates and empirical data on how well the methodology has worked over the years.Part VIThis section entitled Real-time Value Investing contains articles from the 2008 and 2009 period. Unlike economists and many market strategists who hedge their calls sufficiently so that it is difficult to prove whether they are right or wrong, Montier is intellectually honest enough to put his thoughts during the recent financial crisis out in the open. Time will eventually tell if he was mostly right or wrong, but you have to admire his willingness to show where he stands.I own over 500 books on investing. After you've read the first hundred or so, I think it is easy to become jaded and think nothing new has been written in years. Montier's book proves me wrong. His book is an incredible "food for thought" for the thoughtful investor.

This book is both informative and practical and for the most part very funny also. If you don't with in finance, some of the language will be a little mystifying but if you are used to reading the mountains of rubbish that most analysts produce to keep their jobs, this is a most refreshing. Also worth noting is that much of his views were validated by the test of time (I speak from experience of trading thro the credit crisis) - again somewhat unique from sell side analysts (no wonder he's now at GMO not SG!).No it isn't a how to book like "The Intelligent Investor" but I would read this before embarking on setting up a portfolio of your own - intact just read it anyway.

Being someone who works in finance I found the book extremely interesting and insightful. I have met James Montier and found him incredibly sharp and honest. In a time when everybody in asset management is concerned about making a quick sale or a short-term profit, the book reminds us of what investing is supposed to be - a long term endeavor.

A terrible book. A total waste of time. Repeating itself again and again without adding any value. Shame.

Excellent book I knew it would be good when it was recommended by Seth Klarman. What I found most interesting is it doesn’t recommend dcf because if it worked then the same analyst would be winning awards but they aren’t. He recommends to use it only to reverse engineer so see what the market expects of the stock.

Les premiers chapitres sont très théoriques et ennuyeux, cependant la suite est excellente.La majeure partie du bouquin est constitué des articles "Mind Matters" que Montier publiait chaque semaine lorsqu'il était à la Société Générale. Ces articles ont tous étaient publiés entre fin 2007 et mai-juin 2009, en pleine crise.C'est absolument génial pour non seulement apprendre des techniques simples et efficaces de sélection d'investissement mais en plus pour avoir un retour à chaud sur la pire crise financière depuis 1929 par un des meilleurs stratégistes de la planète.Montier consacre également quelques chapitres à détailler les biais psychologiques qui nuisent à l'investisseur et l'empêchent de prendre toujours de bonnes décisions. Et surtout il nous donne des outils pour s'affranchir de ces biais.Bref c'est un concentré de bonnes idées, de bon sens et c'est assez abordable pour les personnes n'ayant pas de formation financière avancée. (je déconseille à ceux qui n'ont pas au moins 2-3 ans d'expériences de la bourse et de l'analyse boursière/ financière).Une bonne maîtrise de l'anglais est aussi nécessaire pour bien tout comprendre.Dommage que le prix soit récemment passé à 30 €, c'est assez cher mais ce livre est un futur classique à mon avis. Je recommande très chaudement.PS : pour les plus économe, attendez la réédition en couverture papier, ce sera moins cher et vous aurez surement des mises à jour.