All Enrollees in the DEEP VALUE COURSE

Please read Chapters 42 – 45 (on the Balance Sheet). Especially focus on Chapter 43, Significance of Current Asset Value in Security Analysis, (pages: 548-613)

Read Chapter 15 in the Intelligent Investor (pages 376-402)

Chapter 22, Graham’s Net-Nets: Outdated or Outstanding in Montier’s Value Investing, (Pages 229-235)

Chapter 2, Contrarians at the Gate in Deep Value, (pages 19 -34)

Chapters 1 & 2 in Quantitative Value (pages 3 – 59)

A total of about 168 pages. This is to give you an early start for next week. If you are short on time, then just read Ch. 2 in DEEP VALUE.

The Institutional Imperative
Sometimes institutions get caught up in the moment as well. A company I used to work for held the Fairholme fund in two separate strategies in 2010. At the end of 2010 I was able to convince the group to completely sell out of the fund in the smaller strategy, but it remained in the larger strategy. In 2011, the Fairholme fund lost about 32% when the S&P 500 was up 2%.

At the end of 2011 I (the author of this article, link below) was able to convince the group to add the Fairholme fund back to the smaller strategy, but was unable to convince them to even maintain its weighting in the larger one. Instead the group decided to cut the allocation in the larger strategy in half, despite my objections. The argument was that the volatility and amount of underperformance (What about Regression to the Mean?) was too great. The amount of underperformance was one of the reasons to add it back to the smaller strategy and in my experience returns trump volatility as volatility can actually be your friend. In 2012, Fairholme was up about 35% which almost beat the S&P 500 by 20%. In the end it was the clients that were hurt as the investment group followed the herd, on the larger strategy at least, keeping a manager after great performance and selling them after poor performance. Read more….

The institutional-imperative

Institutional Investors and Analysts tend to herd-like behavior by acting late after trends are established.

Goldman cuts oil outlook, so NOW you tell us! (Perhaps, a tad late on the prediction!)

Working at Goldman Sachs