market folly

Today we're reviewing the new book, The Art of Value Investing: How the World's Best Investors Beat the Market by John Heins and Whitney Tilson.  These two have aggregated an entire book full of quotes and anecdotes from top hedge fund managers over the years.


The Art of Value Investing: Book Review

MarketFolly.com exists primarily to track hedge funds, examine why they're buying/selling certain stocks, and to learn from great managers.  After all, investing is a continual education.

While learning from your own mistakes is one way to improve your investment process, it can also save you a lot of aggravation and money to take the time to learn from others who are willing to share what they've learned as well, and that's exactly what this book does.

The Art of Value Investing makes you feel as if you're sitting at a giant table full of some of the best investors today.  A topic of investment process is opened for discussion and everyone chimes in with their thoughts, all while you sit there rapidly absorbing all that you can.

Chapters of the book include wisdom from managers on topics such as: circle of competence, generating ideas, portfolio construction, guarding against risk, and more.


Hedge Fund Managers Quoted in the Book

The list is quite extensive, but here's some of the bright minds that are quoted repeatedly in the book:

Seth Klarman (Baupost Group)
Howard Marks (Oaktree Capital)
David Einhorn (Greenlight Capital)
Jon Jacobson (Highfields Capital)
Lee Ainslie (Maverick Capital)
Julian Robertson (Tiger Management)
John Burbank (Passport Capital)
Mitch Julis (Canyon Capital)
Joel Greenblatt (Gotham Capital)
Jeff Ubben (ValueAct Capital)
James Crichton & Adam Weiss (Scout Capital)
Larry Robbins (Glenview Capital)
Ricky Sandler (Eminence Capital)
Bruce Berkowitz (Fairholme Capital)
Thomas Gayner (Markel Corp)
Prem Watsa (Fairfax Financial)

And that's just a few of the big names.  Tons more established and up and coming managers divulge their experiences in The Art of Value Investing.


Quote from the Book

We asked the authors for some of their favorite quotes from the book, and they sent one from David Einhorn on page 107:

"We take the traditional value investor’s process and just flip it around a little bit. If you’re looking for something that’s cheap, you’ll probably do a variety of screens—on price‐to‐sales, price‐toearnings, price‐to‐book, whatever—to identify stocks that appear to be inexpensive. Once you have that list, then you start to research if there are good reasons the stocks deserve to be cheap, or if maybe there’s an investment opportunity because they’re cheap without a good reason. We think that’s the way most value investors approach it.

We never do screens like that. We start by identifying situations in which there is a reason why something might be misunderstood, where it’s likely investors will not have correctly figured out what’s going on. Then we do the more traditional work to confirm whether, in fact, there’s an attractive investment to make. That’s as opposed to starting with something that’s just cheap and then trying to figure out why. We think our way is more efficient."


High Praise From Other Hedge Fund Managers

This is a fantastic book for any investor, whether you're a beginner or a professional.  Don't take our word for it, though.  Here's what Omega Advisors' Lee Cooperman had to say about The Art of Value Investing:

"They have provided in one publication invaluable insights from some of the most accomplished professionals in the investment business.  I would call this publication a must-read for any serious investor."

Pershing Square's Bill Ackman also praised the book:

"(The book) is a thoughtfully organized compilation of some of the best investment insights I have ever read.  Read this book with care.  It will be one of the highest-return investments you will ever make."

Highfields' Jon Jacobson called it a "must-read" and ValueAct Capital's Jeff Ubben said that, "The lessons are like scars and they are revealed here firsthand."

If you enjoy reading MarketFolly, then you'll love soaking up the wisdom from  The Art of Value Investing: How the World's Best Investors Beat the Market.  It's like having your own archive of the minds of some of the most talented managers in the game.