Introduction:
Beyond the Traditional Measures of Value
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Value Investing — The
Traditional View
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Beyond the Traditional
Measures of Value
Secret
# 1: Understanding the Value Investor’s Psychology
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Start Afresh
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Accept the Limitations of
Your Analysis
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Loss is a Probability That
Will Happen
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Consensus Will Eventually Set
the Price of a Stock
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Higher Risk is a ‘Chance’
of Higher Rewards
Secret
# 2: Are You Really Value Investing?
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Watching the Winners is Not
Enough
Secret
# 3: Preparing for Value Investing
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Have a Plan and Arm Yourself
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Parameters for Value
Investing
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Don’t Get Excited by Events
or ‘Excitement Creators’
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Chart Your Own Course
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Think About Risk Before
Returns
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Watch for the 7th, the 8th .
. . Chamber in the Revolver
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Carry Only What You Don’t
Have to Sell in a Hurry
Secret
# 4: Beware the Myths of Value Investing
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Investing for the Long Term
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Don’t Pick Stocks on the
Wrong Syllabus
Secret
# 5: The Reality of Value Investing — Six Degrees of Under-Valuation and
Over-Valuation
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An Under-Valued Stock May
Remain Under-Valued for Years
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Value Investing is Like
Pegging a Tent in Shifting Sands
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Is There Anything Fundamental
About ’the Fundamentals’?
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Short or Long Term Does Not
Depend on You — It Depends
on the Management
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‘Cheap’ and ‘Value’
Are Not the Same Thing
Secret
# 6: Mastering the Rules of the Game
Secret
# 7: The Ways of Value
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Sell When Investment Themes
Run Out
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Increasing Excitement Equals
Over-Valuation
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Markets Will Over- and
Under-React to the
Underlying Dynamics
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Fast Growth May Increase
Revenues but Squeeze Margins
— Or May Even Put Companies Out of
Business
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Emotional Temperament
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Diversification is Not the
Done Thing
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Don’t Confuse Beginner’s
Luck with Skill
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Timing the Market is the Only
Way to Beat It
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Technology and Financial News
are Not a
Competitive Advantage
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Human Behaviour Guides
Markets
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Experience Has No Substitute
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The Blind Spot
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Full Points for Being Right,
None for Winning Arguments
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A Booming Economy Whips Most
Stocks in the Long Run
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‘The Anchor Effect’ Sets
the Price of a Stock
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Overcharged Bull Markets Make
Value Elusive
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Look Over Your Shoulder at
All Times
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What Do We Get from the
‘Gurus’ of Value Investing
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A Stock’s Price is Only as
Good as the Management’s Intent
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Value is Oblivious to Bull or
Bear Markets
Secret
# 8: Where Does Value Originate?
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Markets Never Rise or Fall
Forever — The Law of
Means Catches Up
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Cycles and Trends
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Catching the Structural Shift
in the Market
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Buying in a Fire Sale and
Selling as the Plane is Taking Off
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Not by Diversification
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Tune Out the ‘Noise’
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Long Term Thinking, Yes,
Staying Put in a Stock, No
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In Getting One Right and
Letting the Other Nine Go
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Not in ‘Cheap’ Stocks
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In Holding On Till the Tank
is Full
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In Structural Shifts
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A Diamond Comes Mixed in a
Ton of Mud
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In Staying Invested as Long
as is Necessary
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In ‘New Era’ or ‘New
Asset Class’
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Black Swans Bring Value
Secret
# 9: Where Does Value Disintegrate?
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Two Dimensional Thinking in a
3-Dimensional World
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‘Buy’ and ‘Hold’
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Out of Favour, Out of Value!
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Awe and Reverence
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Accounting Ponzi Makes a
Mockery of Value
Secret
# 10: The Value Mirage
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Risk and Reward Have an
Absolute Correlation
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Booming Economies Produce
Value Stocks
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Markets are Efficient
Secret
# 11: How to Find Value
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The Courage to Act on Your
Beliefs
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Hang in There When an
Investment Mania Starts
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Lock in the Sector before
Latching on to the Stock
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All Falls are Not Created
Equal — Some are Created for Value
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A Liquidity Squeeze Offers
Value and is Different from a Bubble
Secret
# 12: Finding Value in the Market’s Dynamics
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Human Behaviour Holds the
Secret to Stock Prices
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History is Stuffed with
Precedents
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Market Cycles
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Trends are Not Cycles
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Eras, Bubbles and Manias
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There are Often No Rational
Explanations for Market Meltdowns
Secret
# 13: What the Market is Saying About Value
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Value Lessons from the Market
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Reading Investment Themes
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The Economic Domino
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Watch Out for Window Dressing
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The Changing World of Miss
Value
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Cash Flow Rotation
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Value Investing on Themes
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Value Investing is Linked to
Commodity Cycles
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Value Emerges as Sectors
Clean Out
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A Rising Tide Takes Up All
Ships
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Contagions Pollinate Value
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The Commoditization of Stocks
and Sectors
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How Value Emerges in Chaos
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Execution Record in Emerging
Sectors is Value
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The Scarcity Premium
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Looking Out of the Window May
Help You See Value
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Value in Debris
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Value Lies in Deconstructing
Myths
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Sails Need to be Redirected
If the Winds Shift
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Whose Boat are They Rowing?
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Objects of Popular Fantasy
are Fuel to the Fodder
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Value is Built and Destroyed
Over a Number of Actions
and Reactions
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Ask the Hard Questions — Or
Face Soft Returns
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Empty Vessels Make the
Loudest Noise — But Remember,
It is Only Noise
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‘If You Have to Spin Off,
Then I Must Be a Part of It’
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Value in the ‘House of
Horrors’
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24-Hour Media Coverage
Magnifies Contagions
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Manic Behaviour Comes to
Roost
Secret
# 14: Value Investing Lessons from the Masters