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The Manual of Ideas: The Proven Framework for Finding the Best Value Investments

ISBN: 978-1-118-08365-9
336 pages
August 2013
The Manual of Ideas: The Proven Framework for Finding the Best Value Investments (1118083652) cover image
Reveals the proprietary framework used by an exclusive community of top money managers and value investors in their never-ending quest for untapped investment ideas

Considered an indispensable source of cutting-edge research and ideas among the world's top investment firms and money managers, the journal The Manual of Ideas boasts a subscribers list that reads like a Who's Who of high finance. Written by that publication’s managing editor and inspired by its mission to serve as an "idea funnel" for the world's top money managers, this book introduces you to a proven, proprietary framework for finding, researching, analyzing, and implementing the best value investing opportunities. The next best thing to taking a peek under the hoods of some of the most prodigious brains in the business, it gives you uniquely direct access to the thought processes and investment strategies of such super value investors as Warren Buffett, Seth Klarman, Glenn Greenberg, Guy Spier and Joel Greenblatt.

  • Written by the team behind one of the most read and talked-about sources of research and value investing ideas
  • Reviews more than twenty pre-qualified investment ideas and provides an original ranking methodology to help you zero-in on the three to five most compelling investments
  • Delivers a finely-tuned, proprietary investment framework, previously available only to an elite group of TMI subscribers
  • Step-by-step, it walks you through a proven, rigorous approach to finding, researching, analyzing, and implementing worthy ideas
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Preface xiii

CHAPTER 1 A Highly Personal Endeavor: What Do You Want to Own? 1

Give Your Money to Warren Buffett, or Invest It Yourself? 2

Cast Yourself in the Role of Capital Allocator 7

Owner Mentality 14

Stock Selection Framework 17

Key Takeaways 18

Notes 20

CHAPTER 2 Deep Value: Ben Graham–Style Bargains Inelegant but Profi table Strategy of Cigar Butt Investing 23

The Approach: Why It Works 24

Uses and Misuses of Ben Graham–Style Investing 34

Screening for Graham-Style Bargains 41

Beyond Screening: Working through a List of Deep Value Candidates 44

Asking the Right Questions of Graham-Style Bargains 49

Key Takeaways 53

Notes 54

CHAPTER 3 Sum-of-the-Parts Value: Investing in Companies with Excess or Hidden Assets 57

The Approach: Why It Works 58

Uses and Misuses of Investing in Companies with Overlooked Assets 60

Screening for Companies with Multiple Assets 64

Beyond Screening: Proven Ways of Finding Hidden Assets 69

Asking the Right Questions of Companies with Hidden Assets 78
Key Takeaways 81

Notes 82

CHAPTER 4 Greenblatt’s Magic Search for Good and Cheap Stocks 83

The Approach: Why It Works 84

Uses and Misuses of Investing in Good and Cheap Companies 91

Screening for Good and Cheap Companies 98

Beyond Screening: Hope for Improvement Springs Eternal 102

Asking the Right Questions of Greenblatt-Style Bargains 106

Key Takeaways 113

Notes 114

CHAPTER 5 Jockey Stocks: Making Money alongside Great Managers 117

The Approach: Why It Works 118

Uses and Misuses of Investing in Jockeys 121

Screening for Jockey Stocks 131

Beyond Screening: Building a Rolodex of Great Managers 141

Asking the Right Questions of Management 146

Key Takeaways 150

Notes 151

CHAPTER 6 Follow the Leaders: Finding Opportunity in Superinvestor Portfolios 153

Superinvestors Are Super for a Reason 154

Uses and Misuses of Superinvestor Tracking 157

Screening for Companies Owned by Superinvestors 160

The Superinvestors of Buffettsville 163

Beyond Screening: What Makes a Company Attractive to Superinvestors? 171

Key Takeaways 175

Notes 177

CHAPTER 7 Small Stocks, Big Returns? The Opportunity in Underfollowed Small- and Micro-Caps 179

The Approach: Why It Works 180

Uses and Misuses of Investing in Small Companies 185

Screening for Promising Small- and Micro-Caps 189

Beyond Screening: Other Ways of Finding Compelling Small- and Micro-Cap Ideas 197

Asking the Right Questions of Small-Cap Prospects 207

Key Takeaways 212

Notes 214

CHAPTER 8 Special Situations: Uncovering Opportunity in Event-Driven Investments 215

The Approach: Why It Works 216

Uses and Misuses of Investing in Special Situations 220

Uncovering Special Situations 227

Asking the Right Questions of Special Situations 231

Key Takeaways 236

Notes 237

CHAPTER 9 Equity Stubs: Investing (or Speculating?) in Leveraged Companies 239

The Approach: Why It Works 241

Uses and Misuses of Investing in Equity Stubs 242

Screening for Equity Stubs 251

Beyond Screening: An Ambulance-Chasing Approach 253

Asking the Right Questions of Equity Stubs 257

Key Takeaways 264

Notes 265

CHAPTER 10 International Value Investments: Searching for Value beyond Home Country Borders 267

The Approach: Why It Works 269

Uses and Misuses of Investing in International Equities 272

Screening for International Equities 280

Beyond Screening: Riding the Coattails of Regional Experts 283

Asking the Right Questions of International Equities 285

Key Takeaways 291

Notes 292

References 295

About the Author 303

Index 305

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John Mihaljevic, CFA, is a Managing Editor of The Manual of Ideas, the monthly idea-oriented research publication for value-oriented investors, and a Managing Director of ValueConferences, a series of fully online investment conferences for value-oriented investors. He has also served as Managing Partner of the investment firm Mihaljevic Capital Management LLC since 2005. He is a member of Value Investors Club, an exclusive community of top money managers, and has won the club's prize for best investment idea. John is a trained capital allocator, having studied under Yale University Chief Investment Officer David Swensen and served as research assistant to Nobel laureate James Tobin. John holds a BA in economics, summa cum laude, from Yale and is a CFA charterholder. He resides in Zurich, Switzerland, with his wife, two sons, and a daughter.

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"The Manual of Ideas: The Proven Framework for Finding the Best Value Investments provides an overview of nine value investing strategies, including why each one is expected to work, the uses and misuses of each, and how to identify specific investment opportunities for each strategy. It is a useful book both for those looking for a current overview of value investing and for the more experienced value investor seeking a critical analysis of value investing strategies and thoughts on methods for identification of specific investment opportunities."
—CFA Institute Book Review

“A highly recommended read to prepare for 2014, which could be much trickier than 2013.” (Strictly Financial, December 2013).

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