Book Reviews – Page 7 – The Aleph Blog

Book Review: The Manual of Ideas

Posted on 2 November 20133 November 2013 by David Merkel

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.

Quibbles

Already expressed.

Who would benefit from this book: Most investors would benefit from reading this book.? It will aid them in idea generation.? If you want to, you can buy it here: The Manual of Ideas: The Proven Framework for Finding the Best Value Investments.

Full disclosure: The publisher sent me the book after asking me if I wanted it.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

Book Review: Win by not Losing

Posted on 2 November 2013 by David Merkel

Just follow my methods and you will make money. Yes, it is another one of *those* books.? Most of them are not worth your money.? This one might be worth it, but let me give you my misgivings.

The book warms up slowly, because it spends most of its early time destroying other ideas, without introducing their main ideas.? For example, it spends time destroying:

Gains in the market come slowly and steadily.? Correct, that’s wrong.? As my readers should know, market returns are lumpy. [Note to readers at Amazon, there are links at my blog that explain these concepts in greater detail.]
Modern Portfolio Theory.? Again, no argument here, it is not a good explanation as to how the market works.
Volatility isn’t risk; risk is the potential to lose.? Again right.
Diversification among risky assets does not provide much risk reduction.? Again right.
Most mutual funds miss out on the ability to limit risk, because they forbid market timing.? Here I differ.? Aside from funds that aim to time the markets, the asset allocation decision is not in the hands of the managers, but the shareholders, who must them selves decide how much stocks to hold.

This leads to their main hypothesis, that people have been duped into buy & hold investing, when they could make a lot more money if they only invested when conditions are favorable.

There are two problems with this: 1) how can you tell when times are favorable or not?? I use the credit cycle, and estimates of what various asset classes are likely to return if they were private businesses, but not everyone can follow that.? They give their simplified version, which is a moving average crossover method.? Buy when stocks are above the moving average.? Sell when they are below.? Simple, huh?

Yes, simple, and that brings up problem 2.? If a lot of people began managing money in a way like this, the market would become more volatile.? At moving average crossovers, people would rush to buy and sell as groups.? Some would shorten their moving average formula to get a jump on others.? Any risk control method, if used by many will cease to work well.

Other Difficulties

Though it is not a major aspect of their book, and it comes toward the end, part of the goal of the book is to interest people in purchasing their newsletter and/or money management services.
At times, buy and hold investing is the optimal way to go for an era.? Also, not holding assets for a long time limits the ability to limit taxes, and compound really large gains.? My mother and my father-in-law, amateur investors both, limited their taxes on their investing largely through buying and holding quality stocks over decades.? (The authors do advise that their strategy is best done in a tax-deferred account.)
At one point the book insists that the Capital Asset Pricing Model [CAPM] implies that the equity risk premium is constant.? Sorry, but that’s not true.? Many financial planners act as if it is true.? What is true is that it is challenging to estimate the varying equity risk premium.? Value investors have their own way of doing it, but it boils down to: “I’m not seeing many attractive opportunities to deploy capital.”
On page 116, they make too much out of how households have too much money in cash as a fraction of their assets near market bottoms.? The amount of cash may vary some — in general at market bottoms, institutions hold relatively more stock, but the main reason for the increased percentage invested in cash is simply the fall in prices for risky assets.? Aside from IPOs, mergers for cash, acquisitions for cash, money doesn’t enter & exit the market.? Market prices reflect the willing of marginal buyers and sellers to trade cash for stock, and vice-versa.? In aggregate, nothing changes except the price.
They criticize the Facebook IPO as one where sellers knew things would get worse, and so they sold, delivering losses to buyers.? But Facebook stock is considerably higher now than the IPO price.? Those that took the losses from the IPO didn’t wait long enough.
Page 150 — it took a longer time after 1980 before 401(k)s began replacing Defined Benefit pensions plans in any major way.? Congress passed several pieces of legislation in the late 80s which made sponsoring a DB plan less attractive; that’s when the changes started in earnest.
Page 171 — there were many in the insurance industry that remembered being burned on Collateralized Debt Obligations [CDOs] 1998-2002.? It was a common insight that CDOs were weak assets, and underpriced among insurers.? A new class of buyers got skinned in 2008, particularly banks and hedge funds.
Page 180 — there were many firms that anticipated the fall in subprime lending.? I worked for one of them.? I wrote an article about it for RealMoney.com in late 2006.? It took a lot of courage to take action on the “Big Short,” and not many did.
The book dabbles on many topics, showing a superficial understanding of many ideas/events in order to show they one should not buy & hold.? The book plods for 80%+ of its pages developing what fails, and spends less than 20% of its time giving what one ought to do.? Their strategy takes up ~40 pages of a ~240 page book.

All that said, is the strategy a reasonable one?? Probably yes, but not if a lot of people adopt it.? Advanced amateur investors could implement the ideas of the book easily, those with less experience would need help to do it, and the authors offer that help, much of it free, and more for a fee.

Quibbles

Already expressed.? I’ll stick with value investing; I’d rather have a lumpy 15% than a smooth 12%.? This book could have been better if it focused on its positive strategy, fleshed it out more, so that average amateurs would have had a clearer direction on what to do.

Who would benefit from this book: If you don’t have an investing strategy and you want one, this book may benefit you.? I have read far worse strategies in many books.? If you want to, you can buy it here: Win By Not Losing: A Disciplined Approach to Building and Protecting Your Wealth in the Stock Market by Managing Your Risk.

Full disclosure: The publisher sent me the book after asking me if I wanted it.

On Negative Book Reviews

Posted on 19 October 201320 October 2013 by David Merkel

Occasionally, I write negative book reviews.? I am not always right, but sometimes I locate books that are not up to par, or are downright mistaken.? I try to back up my findings with facts, but there is still a problem.? If I publish the negative review at Amazon, it is in the interests of the author and publisher to recruit people to vote my review down.? My Amazon reviewer rank isn’t bad, but it would be a lot higher if I hadn’t written negative reviews that I believe are correct.

So what to do?? There are some books that should not have seen the light of day, and others that are just subpar — don’t waste your money.

As I see it, there is an asymmetry in voting on reviews at Amazon, and it comes down to concentration of interests.? Though I have a bigger voice than many reviewers because of my readership here, if I write a negative review, it is easier for the author/publisher to gather a group to vote me down, than it would be for me to get it voted up, should I try that.

I will continue to post negative reviews at Amazon, and I will try not to care about my reviewer rank.? But Amazon needs to tweak its system — when a voter votes too much for a given reviewer, he is deemed a “fan,” and his votes stop counting.? The same does not apply to negative votes, but I could be wrong there.

Advice is welcome, but it really seems that constructive critics are at a disadvantage with book reviews.

Book Review: The Year Without Pants

Posted on 14 September 2013 by David Merkel

I debated whether to review this book or not.? But I have read the whole book, and I can tell you that it is a great book.? The internet has changed the terms of work for many, and for many programmers they can work where they like.

The author has written many books, and he was invited by WordPress to be a leader of a team inside WordPress.? This tale describes how a guy who used to work for Microsoft could succeed in an unstructured environment like WordPress.

During his tenure, his team created great products for users, like Jetpack, and a consistent comment system.

The title of the book stems from the idea? that bloggers write in their pajamas — they don’t wear pants.? But WordPress powers over 20% of the websites of the internet.? It is a quiet and significant power over the internet.

The book deals with the culture of WordPress, the challenges of offering software versus offering a website, and more.? The creation of Jetpack, and a new comments system occupy a large portion of the book.

Only non-local businesses can benefit from this book.? Most businesses require people to be together regularly.? The book overstates that it is the future of work.? Being local is a big thing, particularly when services are personal, or when transport costs are high.

Quibbles

There are a few grammar errors in the book; it could have used a better editor.? Was there an editor?

Who would benefit from this book: Anyone trying to understand how to manage a dispersed workforce would benefit from this book.? If you want to, you can buy it here: The Year Without Pants.

Full disclosure: The publisher sent me the book after asking me if I wanted it.

Book Review: The One Thing

Posted on 22 August 2013 by David Merkel

Most of us don’t focus enough.? We let important projects lag, while working on matters that are less important.

This book takes the approach that you will do best if you block out the first four hours of your workday, and work on the one task that will make all other aspects of the business work better.

Doing “a little of this, a little of that,” tends to waste time.? We are most productive when we focus.? In an internet age where we live with a huge distraction in front of us, it is all the more imperative that we take control of our time, and focus on the most valuable task.

Quibbles

This book is focused, and as such, you get a lot of repetition.? I’m not crazy about that from a literary point of view, but the author is trying to drive a simple point as many times as he can.

Who would benefit from this book: Anyone trying to improve their time management would benefit from this book.? If you want to, you can buy it here: The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results.

Full disclosure: A dear friend gave me this book.

Book Review: Octopus

Posted on 7 August 2013 by David Merkel

This is not a normal book for me to review.? The claims made by the book are fantastic, and the subject of the book, Sam Israel, would have a strong motive for self-exoneration.? But with any book, unless you have direct insight into what the book talks about, you have to interpret the book consistently, assuming the author has told the truth.? That is what I will do.

I have a saying, “It is very difficult to cheat an honest man.” Why is that so?? An honest man knows that few things come easy in life, and so if something seems too good to be true, he will avoid someone peddling something that is likely to be a scam.

But someone who thinks the world is inherently crooked is much easier to cheat, because he thinks that he will be able to outfox others trying to cheat him.? He is more vulnerable to playing an inside game that few others know about.

Sam Israel drifted into a Ponzi scheme.? He may not have intended to do so, but once you report fake results that are too good, it is difficult to ever come back to true accounting, because the assets have to earn considerably more than average in order to break even.? New money helps a lot, and that is driven by great returns, so there is the incentive to keep reporting “too good” returns.

It’s a treadmill, which is why Ponzi schemes always blow up.? In Sam Israel’s case, it led to all manner of speculative investments that an ordinary investor would never touch.? In the second half of the book, it led to dealing with a smooth-talking guy who charmed and scammed Sam Israel, convincing him that there was a conspiracy that controlled Western governments with a rigged bond market that offered incredible deals to insiders.

Now, to me, anything that seems too complicated to justify the worldview is probably not true.? What reason would a conspiracy have to hand out risk-free profits to anyone?? Governments or conspirators would pocket the money themselves, and would not let anyone else in.? But to a crooked mind that needs an easy win in order to set all things right, this is a perfect setup to separate a fool and his money (or rather, the money of his clients).

As it was, Sam Israel ran out of money and his “hedge fund” collapsed, leaving many foolish investors to mourn their losses.

One more thing: a undercurrent of the book was how they managed to co-opt the auditors.? Beware trusting small no-name auditors.

Quibbles

The book is well-written, and if you take it as fiction, it is a real page-turner.? But as truth, you are reliant on a few voices, mostly Sam Israel and his friends, to tell you what happened.? I’m reluctant to sign onto that, but I can’t fully rule it out either.

Who would benefit from this book: If you like fiction, you will like this.? If you want to look into the pathology of a Ponzi Scheme, it is good there also.? If you like reading sordid tales of greed, foolishness, and lies, you will like it.? Otherwise, avoid.? If you want to, you can buy it here: Octopus: Sam Israel, the Secret Market, and Wall Street’s Wildest Con.

Full disclosure: The publisher sent me a copy of the book for free.

Book Review: Poverty and Progress

Posted on 13 July 201314 July 2013 by David Merkel

I appreciated this book.? In my early 20s, I wanted to do development work in developing countries, but I ran into a problem.? All of the interventionist solutions didn’t work, and countries that ignored the advice of development economists tended to do better.? That has continued to be true since then.? Among academic economists, the battle goes on between the socialists and free marketers.? The battle goes on in many arenas:

It is easy to do cross-sectional time-series regressions across countries, and twist the data to your bias.? In general, more flexible the econometric technique, the lower the probability that it tells an accurate story.? Noise gets interpreted as signal. [The Ph. D.s at the Fed are experts at this.]
How much of poverty is due to culture, recalcitrant governments denying property rights to their people, etc?
How much different was it for the now developed nations to develop during their era?? Do the same principles apply?
Are there really “poverty traps” in development?
Are there structural problems in development that naturally occur, or does it stem from government interference?

This book takes an optimistic view on development, against the crowd that creates complex models in order to allege market imperfections, rather than government imperfections.? The truth is that poverty in the world is in retreat, and abject poverty may not exist in another generation, aside from nations that sabotage themselves.? Nations that are growing can follow the same path of freedom as the developed nations did.

This book will open your eyes on global poverty, and make you realize that we are close to success, aside from self-inflicted wounds.? It will also make you think through the metaphysics and ethics of global warming, and explain to you why it is unfair for the developed nations to constrain the developing nations regarding use of hydrocarbons.? [For those that are rabid bigots on global warming, this book argues that global cooling is happening.? Is your mind open enough to consider the argument?]

I recommend this book highly.? Well written, and not afraid to take some non-consensus views in favor of freedom.

Quibbles

None.

Who would benefit from this book: You have to be interested in development economics to enjoy this book.? If you want to, you can buy it here: Poverty and Progress: Realities and Myths about Global Poverty.

Full disclosure: The publisher sent me a copy of the book for free.

Book Review: The AIG Story

Posted on 19 June 2013 by David Merkel

I am biased on AIG.? It was never as good as proponents of its past have said.? But it was not as bad as current detractors allege.

AIG went through several eras, some of which are barely covered by this book.? There was the secular growth era, which existed from the beginning until the late 1980s.? It was easy to continue to grow in P&C businesses in the US until then.? After that growth would have to come from other ideas:

Life insurance in the US and abroad.
Foreign P&C insurance
Aircraft leasing
Asset management

And so, AIG moved from being primarily a US P&C insurance company to being a behemoth, big in life and P&C everywhere, as well as aircraft leasing and asset management.

Other Books on AIG

If you are reading this book, you ought to also read Fallen Giant. and Fatal Risk.? Excellent books both, but they cover different aspects of AIG.? Fallen Giant focuses more on the development of AIG by the founder Cornelius Vander Starr.? It spends relatively little time on the fast growth era which was the start of Greenberg tenure as CEO.

Fatal Risk focuses on the diversification era under Greenberg’s era, when AIG was so big in US P&C insurance that they began diversifying into risks that had more capital markets exposure — Life, annuities, derivatives, airline leasing, commodities, and asset management.

All three of the books spend disproportionate time on the failure of AIG, which is kind of a shame, because the failure was the simplest part of the story.

No risk controls because Greenberg was ousted.? That said, risk control should be institutionalized, not personalized.? That was Greenberg’s fault.? No one man should be in charge of risk for a whole company.
Too much subprime and other mortgage risk spread through the whole organization. (Investments in the life companies, securities lending, derivatives, direct lending, mortgage insurance, etc.)
True leverage was understated on the GAAP financials.

Notable Information

One aspect of AIG that The AIG Story tells is how AIG became a single company.? There were many minority interests, and when Greenberg was a new CEO he bought all of them in.? That decision allowed the company to focus, and not be concerned with minority interests.

In two breezy pages (122-123) we get Greenberg’s take on how he built his life insurance business, buying SunAmerica (1998) and American General (2001).? An aggressive company buys two more aggressive companies, overpaying in the process.? There should be no surprise why AIG’s stock price was basically flat from 1999 to 2007.? Greenberg overpaid for life insurance companies he did not understand.? He was a P&C guy, and did not get how life insurance companies worked.? He saw two aggressive companies willing to sell at exorbitant prices, and paid up.? Culturally, they fit, but buying overpriced assets always takes its toll.

Not mentioned is the debacle that was the attempt to take over The Equitable in 1991.? AIG assumed that a New York company would have a distinct advantage versus AXA, a French company that was the eventual buyer.? AIG made the following errors:

Scared Equitable’s management team into the arms of AXA, who would treat them well.? Yes, Equitable’s management team was incompetent, and needed to be shown the door, but you didn’t have to tell them that directly.
Assumed that the Real Estate portfolio would not rebound.
AIG offered to buy The Equitable for very little, while AXA offered $1 billion of funny money, surplus notes and convertible debt.? Strange, but the funny money was worth more than almost nothing.

Unlike the purchases of SunAmerica and American General, the purchase of The Equitable would have been cheap.? Very cheap.? And AIG missed it, and also under-rated the abilities of AXA.? I was there; I know.

This brings me to a significant point over what was included, and what was excluded… this is the story as Greenberg wants it to be told.? He excludes his errors, and focuses on his achievements.? He was not as good of a CEO as often credited in the 1990s.

On page 127, Greenberg talks about leaving markets where AIG could not earn an underwriting profit, but by the 1990s, AIG was so big that that flexibility was gone.

Closed Culture

AIG’s culture bound employee? fortunes to the stock price of AIG.? Options, participation in C.V. Starr, and a number of other programs created significant incentives for people to stay, and trust in the continual increase in the price of AIG shares.? That created a culture of “lifers” if if survived long enough.

Also, in the 1980s and 1990s the board of AIG had more insiders than most, but when corporate governance rules changed, by 2005, the AIG board was populated by enough incompetent businesspeople, that there was no way that they could control the risks inside AIG.? They tossed out Greenberg at the behest of Spitzer, and then could not supply the moxie that Greenberg had.

The Financial Crisis

The post-2008 Greenberg understands the financial crisis.? Let me quote:

A financial crisis was brewing due to a combination a including: (1) U.S. policy overstimulated appetites for home ownership and kept interest rates low for too long, (2) regulation of institutions was poor, as commercial banks fed the appetite for home ownership with generous mortgages while investment banks demand with complex financial products and increasing leverage; (3) rating agencies failed to analyze many financial products adequately, and the lack of trading in such products on organized markets made them difficult to value; and (4) regulators at the SEC failed to monitor the leverage of many financial institutions, whose debt levels rose to as much as 30 to 40 times capital and, in AIG’s case, regulators at the? Office of Thrift Supervision, which had authority because AIG owned a savings and loan association, simply ignored any signs of trouble.

Hindsight is 20/20… there were many mortgages insured by AIG before Greenberg left, and many mortgage bonds purchased by his life subsidiaries as well.

Greenberg tries to make out the problems of AIG as a liquidity crisis, and not a solvency crisis.? I’m sorry, but in a panic, there is no difference.? If you can’t produce cash when needed, you are insolvent.? It’s that simple.? AIG had enough incremental demands for cash in the crisis, that it should have gone into chapter 11.? Maybe the Fed should have rescued the derivatives counterparty, and charged it back to AIG, but beyond that, it should not have acted.? Much as Greenberg complains, AIG was insolvent, and should have been reorganized.? He would have gotten far less as a result.

He also takes umbrage against Ed Liddy, a good man who attempted to do what the stupid government wanted — liquidate in a hurry, but Greenberg does not recognize that he set much of this process (though not all of it) in motion himself.

Greenberg won the suits against himself.? He personally did nothing materially wrong.? But the mismanagement of AIG in the Greenberg era and the time thereafter did deserve to be punished with chapter 11, not coddled with a bailout and tax incentives.

Quibbles

The book is worth reading, but what you are getting here is court history — the history as approved by the King.? It has elements of history in it, and it is mostly true, but you have to consider the source.? A lot of true history was purposely omitted.

Who would benefit from this book: If you are an AIG buff, you can’t get the full picture without knowing what Greenberg purports.? If you want to, you can buy it here: The AIG Story.

Full disclosure: The publisher sent me a copy of the book for free.

Book Review: Investing in Municipal Bonds

Posted on 16 June 2013 by David Merkel

In my life, I have been a mortgage bond manager, and a corporate bond manager.? I have enough overall experience that I have played in most bond and loan categories, including municipal bonds.

Municipal bonds are one place where the competition level is low, and additional knowledge can pay off.? This is particularly true in an era where municipal bond insurance is less prevalent, and as such credit analysis has more value.

This book gives you the basics on municipal bonds.? The most basic idea is economic necessity.? Who will be harmed if the municipality in question can’t perform?? If the the answer is “few,” that might not be a good municipal bond to buy, unless there are significant covenants requiring a municipality to raise taxes to pay for the debt service.

Municipal bonds are an unusual market because there are many issuers, purposes, and bond styles.? The dominant non-taxable bonds are only bought by Americans, and sometimes only by those in a given state.

Municipal bonds are also different because most of the bonds issued have long maturity dates.? Municipalities want predictability in borrowing costs; they also match the borrowing term to the length of what is funded, which is typically long.

The book will take you through:

Bond types
Covenants
Types of bonds that are more risky
How bonds pay off
Taxation of bonds
The ugliness of trading municipal bonds
The challenge of analyzing municipal economies
Basic yield calculations
Portfolio management
Derivatives — though that was more of an issue in the past

I would highlight one big issue here.? Most small municipal issues rarely trade.? Assembling your own portfolio of municipal bonds is a tough proposition.? Flexibility is required to assemble your own ladder of municipal bonds.

Quibbles

None.? Good book.

Who would benefit from this book: If you are willing to put in the time to analyze what municipal bonds are worthy to be bought, this book will help you.? If you want to, you can buy it here: INVESTING IN MUNICIPAL BONDS: How to Balance Risk and Reward for Success in Today?s Bond Market.

Full disclosure: The publisher sent me a copy of the book for free.

Book Review: Quantitative Value

Posted on 15 June 2013 by David Merkel

This is a book that gets everything right in broad, but is too insistent on the details.? How should you approach value investing from a purely quantitative standpoint?? Easy:

Screen out stocks that have relatively high accruals
Avoid companies that may go bankrupt
Margin of safety: choose companies with strong balance sheets and profits
Look for long-term strength in profits.
Buy them cheap.
Buy when informed investors are buying.

But here’s the problem.? Like the book What Works on Wall Street, Quantitative Value suffers from over-optimization.? You pass through the data too many times, and you show great returns from the past, should someone have done it that way.? But how much of the result is signal, and how much is an accident?

The broad principles are unavoidably true.? Even the measure of quality, Gross Profits as a fraction of Assets, was new to me, but when I read it, I realized that it was a proxy for having a moat, a sustainable competitive advantage.? I added it to my screening framework.

With all of that said, I have simple advice to the readers.? Follow the broad outlines of what the book teaches, but don’t follow it in detail.? It is good to own companies that are sound, cheap, and improving.

I would also add this: use quantitative screening and scoring as a first step.? I often note that companies that score well in my screens have accounting issues.? So, be wary, and realize that value investing primarily means having a margin of safety. I.e., you won’t lose much if you are wrong.? Purely quantitative value investing can be improved through company and industry knowledge.

Quibbles

Already expressed.

Who would benefit from this book: Amateur value investors will benefit from this book; if the reader does not want to put the effort into learning value investing, this book will be of no use to him.? If you want to, you can buy it here: Quantitative Value, + Web Site: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors.

Full disclosure: The publisher sent me a copy of the book for free.