on November 3, 2013
I'm a value investor, and one that is not doctrinaire about a narrow set of principles. Yes, I like my eight rules, but they are broad principles that admit a lot of flexibility.
The Manual of Ideas introduces readers to a wide number of ways to source investing ideas that may offer value. There are nine main areas that they highlight:
1) One can invest in a small number of stocks that are worth more dead than alive. Net-net stocks show places where the downside is minimal, and profits could be made if either the company turns around or liquidates.
2) Sometimes companies obscure their value because they do multiple things. The company would be more valuable broken into its constituent parts, which would get a higher valuation in aggregate.
3) You can follow the magic formula, and buy stocks that have high returns on equity and low P/E ratios.
4) You can own stocks managed by talented managers, and I admit that maybe 7 of the 37 stocks I hold fall into that bucket, and I will not readily sell them. The question is how you find those managers. That's not easy, and involves industry knowledge which is not available to all.
5) You can own stocks owned by smart investors, and I admit that I track this every quarter. I get a lot of good ideas from them, but I like to look at the ideas that are cold, because they offer more potential.
6) Buy teensy stocks that no one follows, that are making money and have legitimate business models. You can't put a lot of money to work that way, but if you get it right, it can add value.
7) Buy companies that are undergoing a structural change that adds value. Example: a petroleum refiner decides to spin off a pipeline Master Limited Partnership.
8 ) Buy highly indebted companies that offer the potential of huge gains if the idea works out. Screen out companies that are more likely to lose it all.
9) Buy international companies -- the scrutiny and competition are less -- you may find something genuinely cheap, but make sure they play fair with outside passive minority shareholders.
There are some very good methods here, but what should you decide to pursue? That is the one weakness of the book. The book gives you a significant but not exhaustive tour of the ideas behind value investing. What would have added a lot is an integrated chapter on when it is best to pursue each set of ideas. It is difficult enough for professional investors to know which method is best at a given time, much less amateurs. The time of investors, both professional and amateur, is limited. It would be a great aid to figure out how to prioritize the methods or ideas.
Also, more emphasis on margin of safety would have been useful. We can never get too much of that.
But I would recommend this book strongly to all investors. It will strengthen your idea generation processes.
Who would benefit from this book: Most investors would benefit from reading this book. It will aid them in idea generation.
on September 29, 2013
I spend hours on the weekends going through hundreds of pages on Amazon and John Wiley & Sons website in order to discover new books on value investing. This book by John M. is among the GREATEST books I have read on the subject. I have read the classic books by Ben G. (i.e. Intelligent Investor, Security Analysis, etc.) as well as by the world's most foremost value practitioners and thought leaders (i.e. Howard Mark's book, Bruce Greenwald books, Marty Whitman classics, Charles Ellis, Columbia Business School security analysis faculty textbooks, etc.) Some say that once you read one book on value investing there is no benefit to reading additional books. I disagree with that statement and find that each book, if written by a truly reputable expert on the topic, adds more color to the 'mosaic' of the investment philosophy. I was just blown away with how comprehensive The Manual of Ideas was re: the variety of approaches to the value investing philosophy. Each chapter covers a different element of the overall philosophy. I was so very excited when I first learned this book would come out and actually read the entire first chapter, table of contents, and index before it was published. I knew it was an immediate winner. One of the favorite investors in the world is David Swenson, of Yale Investment Office fame. I have read David S. book multiple times, and was so impressed to learn that the author of this book was trained under him and even was a research assistant for James Tobin (whom, if I am not mistaken was David S. mentor :) I really feel I cannot emphasize enough what an awesome book this is. I have only read it once cover to cover but will re-read it again multiple times as I gain more and more experience. The Manual of Ideas even has a You Tube channel with AWESOME interviews with value investing luminaries. Seeing how in-depth and great this book is I am also considering signing up for the associated newsletter once I finish my JD / MBA program and launch my flagship fund. Just the list of up-and-coming value investing funds mentioned under the Super Investors chapter can have you spending years following SEC 13-F filings for these super investors. In summary, I have spent years reading and studying the portfolios of value investors and though leaders. This book is very new release. To be honest I want to one day write a book on value investing in the tail end of my fund career (we are talking multiple decades down the line). Books like The Manual of Ideas can held form the foundation of my thinking on the investment philosophy knows as value investing. I wish I could give it more than 5 stars I enjoyed it so much.
on September 25, 2013
To be perfectly honest, I didn't think I'd get much out of the book. I knew what it was about before I started reading it: a breakdown of a number of types of value investments, and how to profit from them. I figured a book with that much breadth would lack the depth I normally desire in a topic in which I'm versed.
But I was wrong. Mihaljevic managed to add a number of insights and dimensions to the various discussions, giving me a new way to think about things. While I've watched Mihaljevic conduct a number of interviews at manualofideas.com, I never saw him as more than a conduit to the reason I clicked through: the interviewee. However, with this book Mihaljevic demonstrates an understanding of business that makes it clear he is a very smart investor in his own right.
Certain aspects of the book I particularly enjoyed are the screening hacks employed to identify potential value investments in the various categories he discusses. Some of them are rather creative, which I am grateful to be able to add to my toolkit!
I don't think I've ever seen this much depth and this much breadth packed into a less-than 300 page book, and I would suggest it is well worth your time if you're a value investor.
on December 5, 2013
This book is a result from John Mihaljevic's many projects, for example the websites Manual of Ideas and Valueconferences plus his investment firm, Mihaljevic Capital Management LL., and all of these are in their turn the result of his effort to answer a question he put to himself in 2003, "Should I give my savings to Warren Buffett or invest it myself?" In 2003 he had savings of 100,000 USD, after working as an analyst at Thomas Weisel for a couple of years. Ten years later he has produced this book to answer that question. I highly praise Mihaljevic's total achievement, not the least since it's a lot about sharing.
This is a very current book which I think is unique in the sense that it connects to all of the above-mentioned work that is ongoing in real-time. So after reading this review, buy the book, and after reading the book go to the author's website [...] to be updated with the latest details as well. The Manual of Ideas is not a beginner's book, but I still maintain that everyone, including those who think they know everything, will learn something from this book.
The first chapter spells out the author's personal story and gives you a great framework, nothing really new if you are a value investor already but a very nice summary and also the chapter the author recommends the most. The following nine chapters are devoted to various ways to make money. Some of the chapters are unnecessarily long and slightly repetitive. More actual examples would have been helpful. All "Magic Formula lovers" are in for a treat in chapter four. It contains a lot of insights and a guest appearance by Joel Greenblatt, who takes his formula further.
However my three favorite chapters are, three, eight and nine. Chapter three - Sum-of-The-Parts-Value - is an intriguing chapter that I found very useful, not least the list of ten investors specialized in finding these types of situations with CIK number to search SEC filings. Chapter eight - Special Situations - has a few wonderful pages on behavioral issues and how everyone can improve themselves (writing an investment diary). This chapter also has a list of websites/blogs that the author recommends. Since they were quite a few, I asked Mihaljevic for his top picks and they are: Corner of Berkshire and Fairfax, Old School Value, and the American Association of Individual Investors. Chapter nine - Equity Stubs - is a very insightful chapter on the dynamic of equity and debt. "I look for situations where I think prices reflect some sort of probability misjudgment".
Most of Mihaljevic's ideas are problematic as value investing in many ways means investing when things are bad (and even getting worse), i.e. you have no trigger and need to be patient. There is some discussion on the topic in the book in most every chapter, which I think could have merited a chapter by itself. However, the author kindly provided me with the following answer: "Timing and catalysts are some of the most misunderstood concepts in investing. The problem is that if a catalyst is evident, the stock price will have already moved to reflect the catalyst. Meanwhile, most investors don't have the patience to buy a clearly undervalued company in the absence of an identifiable catalyst. Ironically, my experience has been that truly cheap equities outperform even without a catalyst. Ben Graham referred to this as the mystery of the market, which acts as a "weighing machine" over time. Smart investors like Joel Greenblatt have even talked about "time arbitrage" as a strategy, referring to the market-beating returns available to investors who are willing to invest without worrying about timing". This actually fits very well with my own view and it's very neatly formulated above. If I would add a little bit to this, it would be to stay clear of companies/industries at risk of being in secular decline and capital-intensive industries, especially if they have a lot of debt. Otherwise you run the risk of a permanent loss of capital and you don't have time on your side.
I am very happy that Mihaljevic didn't give his savings to Buffett, but instead wrote this book and everything else. I look forward to his next book and all other pursuits. Best of luck John, and please make sure to write another book.
This is a review by investingbythebooks.com
on September 15, 2013
This book contains very readable and effective discussions and analyses of the different approaches to value investing. Although there are many examples of ideas and approaches by well-known value investors such as Warren Buffett, Benjamin Graham, John Neff, Seth Klarman, Bruce Berkowitz, etc., the reader is introduced to a large number of value investors (and their ideas) that most of us haven't heard of to date.
Value investing, as the name implies, focuses more on identifying corporate values (whether they are on a company's balance sheet, as is often the case, or elsewhere), and it is much less focused on whether or not a company beats analyst expectations next quarter. Momentum investors and traders most likely will not view this book as an interesting read. However, for value investors or those curious about value investing, this is one of the best investment books I have read in a long time.
on June 19, 2014
Lots of positive reviews for this book on Amazon, so I decided I might give my opinion as well. I'll try to make my review as balanced as possible, so the interested buyer can know what to expect from this book. Most of the reviews I've read here so far only say how wonderful this book is, without delving into the actual details of the book.
- A clear categorized overview of the (investment) ideas he gives you. Some twists to the Magic Formula by Greenblatt, how to look at small caps, betting on the jockey, ..
- Some fresh ideas that make sense, for example: look for stocks where they are returning above average returns on capital and where they systematically buy back their own stock (year after year), ... It makes sense to start a list with company tickers who do this
- Tons of good citations from well-known value investors.
- The biggest disadvantage for me is the overly theoretical presentation of the ideas in this book. Almost each chapter, each idea, each table, ... is a theoretical (not real life) example. If the author would have just used real live income sheets and balance tables from actual companies it would have increased the credibility a lot. See for example the chapter on the Magic Formula, not once is the author referring to real stock examples, he stays stuck in his theoretical ideas. It's almost like this author was afraid to use real examples in his book.
For this I'm giving the book only 3 *. I'm an investor who wants to use ideas, frameworks, ... I'm not just a reader who's looking for a book/text to read on value investing, or an imaginary cashflow sheet where a company theoretically returns 0% or 10% or 100%.
- This might be a detail, but the footnotes are unclear and untraceable, e.g. "See Buffett (2009)" or "See McDonald (2005)". Very sloppy reference work.He might as well have said: "Buffett said this somewhere" or "it's in one of Greeblatt his books"
- No information at all on position sizing, (applicable) risk management, ...
All in all, I think a lot of the 5* reviewers are value investors who like this book cause of the citation or the overview (or confirmation if you like) that value investing is a profitable way to make money in the stock market. There's nothing wrong with that, but there already hundreds of theoretical books on value investing like this one out there, I'm looking for books that can offer something new to this domain. I don't feel this author added that much with this book.
On the other hand, if you are a value investor who likes theoretical discussions on investing or why value investing might actually work, you' ll probably will like this one. If you're already an active (experienced) value investor looking out for something new to learn/apply, you're likely to read mostly concepts/ideas you already knew before.
on August 23, 2013
An excellent view on most(all) value investing approaches. Actually provides something new and of great value to investors of all levels, instead of just talking about valuation metrics, this book actually teaches you how to go beyond the basic screens and truly investigate, giving you a framework and checklist for each variation of value investing. The segmenting of value investing into the various styles is a master stroke, now in one book you can immediately feel which style resonates the best with your own outlook and personality and concentrate on that approach, truly staying within your own circle of competence. A great book, highly recommended!
on November 25, 2013
This book runs though various investing styles, typically with a value bias, and documents their pros and cons, often using recent examples (note - recent for 2013, by 2015+ the examples will be dated). It's a good summary of investment themes for the reasonably advanced investor. For example, you should ideally know what a price/book ratio is and know your way around a balance sheet and income statement before reading this book, if not, there are probably other books you'd get more value out of or you may find this book slow going. The book is also a good summary of other investment books out there, since it devotes basically a chapter to many of them (e.g. Magic Formula Investing, Graham/Dodd, Buffet etc.). If you are an active value investor you'll enjoy this book. I was skeptical because it is a book that basically originated from an investment newsletter, and investment newsletters are frankly useless scams in many cases, but even the underlying investment newsletter behind this is exceptionally high quality. Ultimately, this book manages to both summarize and critique value investing methodologies/techniques effectively for an advanced audience. I'd put it in the top 10% of investing books I've read.
on December 12, 2013
The Manual of Ideas is a special work, one that I believe deserves sitting alongside classics such as "The Intelligent Investor." Being familiar with the author's first-rate monthly publication and periodic investment conferences, among other resources (e.g. podcasts and videos), it is very clear John has done the global value investing community a great service in distilling the very best of the best in how to "think" about one's approach to value overall, with keen insights into particular value strategies.
Don't expect to be lectured with flowery prose on the merits of value investing or to be spoon-fed a bunch of back-tested investment ideas (although actual investment examples and companies of relevance are mentioned throughout the book). This is the thinking investor's book. Warren Buffett is quoted from time to time for having said that he wouldn't mind if the stock market were closed for five years [i.e. he's very comfortable with his investments]. I would liken "The Manual of Ideas" book to that, as in, if you could only get your hands on one investment book for the next five years, this is the book you want. I enjoyed all of the chapters -- John did an excellent job at balancing breadth and depth of topics and keeping the book at a reasonable length. The 'Key Takeaways' at chapter-end are helpful, as are the numerous commentaries from value fund managers. And the sourcing of information substantiates the hard, important work MOI does on a daily basis.
As a private investor with a highly-concentrated portfolio of mostly Japanese equities, the book was very relevant to this universe, as well as of course for sourcing and approaching U.S. (and int'l) equities. I find it hard not to be excited about the book as it truly complements MOI's other investment/information offerings. While the book is deserving of my highest praise and has received such high praise from all walks of value investors, to go on further would be redundant. Bottom-line: there is always room for improvement; rather than getting even ankle-deep in market "noise," do yourself a favor and read "The Manual of Ideas." My thanks to John for his sharing such wisdom and stimulating my own thinking/application of capital allocation and frameworks for the various value strategies.
on September 26, 2013
John manages to collate and categorise a huge body of knowledge into some very common sense groupings. Categorisation of an investment case is an important process and something the great Warrent Buffett spoke about in his early letters to partners in the 1950's. Whilst no two investment situations are the same, there are often common sign posts that can point the way to successful outcomes. Reminding oneself of these common categories is an important task for the ambitous investor. Thanks John for the very useful manual of ideas!