Value Masters Trying to Beat the Market

By pjain      Published Dec. 26, 2019, 9:50 p.m. in blog Invest   


Major Value Masters

Benjamin Graham - Intelligent Investor

Stocks are pieces of businesses you want to buy

Charlie Munger

Warren Buffet

Guy Spier

The Founder and Managing Director of Aquamarine Capital. He is the author of the recently released book, “The Education of a Value Investor.” He lives in Zurich, Switzerland with his wife Lory and three children. Guy is a member of Young Presidents’ Organization (YPO) and an avid road biker.

Mohnish Pabrai

The Managing Partner of Pabrai Investment Funds and Dhandho Holdings. He is the founder of The Dakshana Foundation (, which has sent over 600 impoverished kids to the IITs in the last four years. He is the author of “The Dhandho Investor.” Mohnish resides with his family in Irvine, California. He loves reading, racquetball, road biking and playing duplicate bridge.

Legg Mason CIO Michael Mauboussin

  1. Luck can trump skill when investing in the stock market.
  2. Continuum of Luck to Skill - every pro is some mix
    • Pure Luck - slots or lottery
    • Pure skill - tennis - "pure merit"
  3. The paradox of skill - the more competition they face (all have same trainers, computers, tools), and the more important luck becomes more important.In sports, the gap between bronze, silver, gold much closer between athletes.

  4. FAT PITCH - role of sample size in assessing a manager. Accuracy of LOTS of decisions or fewer better ones.

  5. PROCESS and Right thinking Matters in Probabilistic processes

  6. Prepared get lucky - be ready for change or sudden opportunities
  7. In any probabilistic field — investing, handicapping, or gambling — you’re better off focusing on the decision-making process than on the short-term outcome. You simply cannot judge results in a probabilistic system over the short term because there is way too much randomness.

  8. Strategy, Coaching .. Guidance, Mentoring - mind game - gets the edge

  9. More moving around of funds - hurts - bad timing, chasing returns. HOT HAND manager gets the job even if the skilled manager have periods of underperformance.

  10. Book "THINK TWICE: Harnessing The Power Of Counterintuition"

  11. Book More Than You Know: Finding Financial Wisdom in Unconventional Places’

Jim O'Shaughnessy

What it takes to be a successful active investor. Hint, it’s much harder than you think. Contrast active and passive equity investing. Risk/rewards. Conclusion—Investors who do not have the following traits and emotional quality should index their portfolios. I find they are the majority of investors today. Also discussion of points of failure for passive and active investors.

What traits and emotional characteristics are required to succeed as an active investor?

A true long-term perspective on their investments. Discussion of Evolution and why it hampers long-term thinking. Discussion of behavioral biases that hamper successful long-term active investing. Power Point illustrations. Successful active investors value process over outcome. Short-term focus of investors is killing returns. Why you need access to truly long-term data to make intelligent choice.

Successful active investors generally ignore forecasts and predictions. Discussion of studies proving forecasts and predictions are virtually worthless; illustrations documenting the failure of forecasts; both within markets and in outside professions. Successful active investors are patient and persistent. Discussion of great investors who may have very different styles, but all share the trait of patience and persistence. Successful active investors have a strong mental attitude.
Successful investors are made, not born. Discussion of how successful active investors have a mental attitude bordering on stoicism; how they control how they interpret the world. Tools to use to help you succeed as an active long-term investor. Long-term data uncovered by What Works on Wall Street that you can use to guide your investment strategy. The importance of value; momentum; financial strength and earnings quality in putting together your portfolio. A highlight of stocks with high versus low shareholder yield (Cash dividend %+Bet Buyback %); it’s efficacy since the 1920s What NOT to own, lottery stocks versus the market. The importance of a stock’s market capitalization—the most profitable stocks come from the smallest part of the market (Micro cap stocks) Putting it all together—should you be an active or passive investor? Weight of the evidence for passive and active investing Which type of investor are you? Getting the best out of the style you choose.


Joel Greenblatt

Review, Keys


The founder of Gotham Capital, the hedge fund he started in 1985 that produced 40 percent annualized returns under his 20-year tutelage.

Largest holdings

  • As of mid 2019
  • AAPL
  • JNJ
  • PFE
  • ABBV
  • GOOG
  • MSFT
  • BA
  • PG
  • BLK
  • TXN - low quality as R&D slashed and massive buybacks
  • HON - sw-industrial, iot FCF+50% 5yr vs GE down 80% in 5yr,higher n% aero

The Big Secret for the Small Investor 2011

Investing comes down to valuing something and paying a big discount to that value

Magic Formula - The Little Book that Beats the Market 2005

The strategy relies only on two metrics; Return On Capital and Earnings Yield to determine which stocks to buy. An investor could rely solely on these numbers alone and achieve 30.8% per year in the period of 1988 to 2004! (as reported in the book)

However, Tobias Carlisle tested the metrics separately and realised that the Earnings Yield was performing better than the combined metrics! That finding essentially gave rise to his establishment of Tobias' Acquirer’s Multiple.

You can be a Stock Market Genius 1997


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