Value Investing – Timeless Reading

Full archive of 1983-2009 letters Scribd here2009200820072006200520042003200220012000199919981997

Leucadia Shareholder Letters

• Leucadia Letters - 1978 to 2015
• 2004 posted April 25, 2005
• 2005 posted April 18, 2006
• 2006 posted April 17, 2007
• 2007 posted April 16, 2008
• 2008 posted April 15, 2009
• 2009 posted April 9, 2010
• 2010 posted April 13, 2011
• 2011 posted April 13, 2012
• 2012 posted June 25, 201

---

Value investing case studies

• Dun and Bradstreet Corporation
• Harley-Davidson Inc.
• HQ Sustainable Maritime Industries Inc.
• La-Z-Boy
• National Presto Industries
• Sanderson Farms
• The Brink’s Company

---

Value funds websites

• http://www.fairholmefunds.com/
• http://thirdave.com/ta/shareholder-letters-mf.asp
• http://tweedy.com/research/index.php
• http://www.sequoiafund.com/fund-reports.htm
• http://www.olsteinfunds.com/fund_summary.html
• http://www.thebrucefund.com/library.cfm
• http://www.oakmark.com/man_comm/man_comm.asp?selected=Manager+Commentary
• https://www.dodgeandcox.com/prospectus.asp
• http://www.longleafpartners.com/news/articles.cfm
• http://www.weitzfunds.com/Literature/default.asp
• http://www.yacktman.com/articles_news.html
• http://www.firsteaglefunds.com/literature/
• http://www.gabelli.com/mutual-funds.html
• http://www.baronfunds.com/default.asp?P=489654&S=489657
• http://www.muhlenkamp.com/whatsnew/seminars-webcasts/
• http://www.pzena.com/heading-our-research/our-research.php
• http://www.wintergreenfund.com/reports/semi-annual/
• http://www.roycefunds.com/
• http://www.fpafunds.com/crescentfund.asp
• Aegis Value Fund – Scott L. Barbee
• Ariel Capital Management, LLC – John W. Rogers, Jr.Auxier
• Asset Management – Jeffrey Auxier
• Chou Funds – Francis Chou
• Davis Funds – Shelby Davis
• Forester Capital Management – Thomas H. Forester
• Investment Management Industry Snapshot (PDF)

---

A nice Buffett Guide

A great guide of over 500 Q&As with Warren Buffett, sorted and compiled to find every answer to every question you ever had about Berkshire and/or Buffett

Sections

• Investing Approach
• Valuation
• How to Think About Businesses
• Alternatives to Common Stock
• Accounting, Corporate Finance & Investing
• Foreign Investments
• The Investment Industry
• Industries
• Specific Businesses
• Berkshire
• The Market
• Management
• Technology
• Education
• Personal
• Advice
• The Big Picture
• Thanks and Credits

Investing Approach

1. Have you ever bought a company where the numbers told you not to? How much is quantitative and how much is qualitative?
2. What is it that really piques your interest in a stock? What tells you that it could be interesting?
3. What is your investment process?
4. What's your acquisition criteria? What has made you successful in this area where most others have failed?
5. What's your acquisition strategy? How do you get deals?
6. Deal flow?
7. What sources of investment ideas are available today?
8. Do you have any investing tips?
9. How do you build your investment knowledge?
10. Is there an organizational model that allows you to deal with all the information?
11. Do you have advice for the individual investor to help them narrow the stock universe?
12. What advice would you give to new investors?
13. Advice for getting into investing?
14. Where is a good place for new investors to invest right now?
15. What advice would you give to non-professional investors?
16. Are investors more or less knowledgeable today compared to ten years ago?
17. How to approach index funds?
18. If you were today 20-something years old would you primarily be searching for: a) Situations reminiscent of 1957 – akin to Daehan Flour Mills, or b) Situations reminiscent of 1987 – akin to Moody’s Corporation?
19. What's your opinion of cigar butts vs quality businesses?
20. If you were starting out again today, what would you do the same or differently?
21. First, would you say 'I could make you 50% a year on $1 million' again today? Second, what else would you do differently?
22. Do you believe that we'll have significant mispricings again? And if you were 26 today how would you generate the 50% returns that you said you might do with smaller amounts of capital?
23. Where Can I Find 50% Returns?
24. Could you describe the capital allocation process you follow? How do you determine the charges for capital to your different managers?
25. What filters do you use when looking at companies?
26. How would you recommend an individual investor who follows the Graham and Dodd philosophy to allocate their capital today?
27. What impacts have Graham/Dodd and Phil Fisher had on your investment philosophy? What percentage of your investment philosophy would you attribute to each of them?
28. Since Ben Graham isn't around anymore, what money managers do you respect today? Is there a Ben Graham today?
29. If you were to teach an investment course, besides works by Ben Graham and Phil Fisher and your book on the instalment basis, what would be on the syllabus
30. What's the temperament of successful investors?
31. Do you agree with Philip Fisher's two reasons to sell?
32. What tells you when an investment has reached its full potential?
33. Could you explain more about the circle of competence?
34. What two industries are the first you should learn when developing your circle of competence?
35. Is there a moral connection to who you invest in?
36. Who do you think will be one of the next greatest investors and are you partial to favoring someone with a similar investment style as yours?
37. What do you think of discounted cash flow (DCF) models?
38. Could you explain your opportunity cost decisions of the past year?
39. What are your views on diversification?
40. Would you consider spinning off some companies to realize value?
41. Why would you hold stocks forever, if the fundamentals change permanently? (Buy and hold)
42. Why do you think more people don't follow your advice?
43. Why do you think that despite making your methods publicly available, that relatively few people have been able to emulate your success?
44. What have been your best investments ever?
45. Could you give us your definition of stock market risk?
46. How much and how does risk factor into your investment decisions? Would you invest in emerging markets?
47. What do you think of setting an asset allocation?
48. How often do you review each position in your portfolio?
49. What are your expectations for future returns on stocks?
50. Do you expect the stock market premium to continue to be 6.5% over bonds?
51. You have espoused a constant ROE on the stock market of about 13%, over time. Do you think that such an expectation is reasonable if you factor into equity and ROE the effect of stock options granted to managements? When option programs are present in a company, what do you think is a realistic way of valuing them on a cash basis?
52. Do you think investors expect too much?
53. What's your investment hurdle rate?
54. Do you prefer public or private investments?
55. Investors eventually repeat their mistakes. How can you prevent this--through fast growth or safety?
56. Why do large caps outperform small caps?
57. What is the definition of Value vs. Growth stocks?
58. From the partnership letters in 1964, you had a strategy called ‘generals relatively undervalued.’ We have recently begun to implement a technique where we buy something at 12x, when comps sell at 20x. Comps go to 10x. Is this pair trading?
59. Importance of filtering out the noise?
60. What is the benefit of being an out-of-towner as opposed to being on Wall Street?
61. There is always mention that some of your success could be attributed to not buying in to the Wall Street mania b/c you are in Omaha—what importance do you give to balance as it pertains to work and life and what do you do to maintain your appropriate balance?
62. There are a record number of ‘value’ investors here this year. Are there fewer $100 bills? Should I go to run a business instead of being a value fund manager?
63. Do you ever change your investing standards?
64. Have there been instances in your career where you have been tempted to deviate from your strategy and if so, how did you handle that?
65. When did you know you were rich?
66. How important is conviction in investing?
67. How do you avoid misjudgement?
68. How do you improve independent thinking?
69. What are the key traits needed to correct the crowd mentality?
70. Don't you have a lot of competition to buy great businesses? For example, from private equity funds?
71. How do you learn who to trust and who not to trust?
72. What's your philosophy on partnering with others?
73. We know that you are a big bridge player. Do you think that bridge correlates to investing? Are there any traits or characteristics that might carry over from one to the other?

>>> back to the top.

Valuation

1. How do you think about value?
2. How do you calculate intrinsic value?
3. What do you believe to be the most important tools in determining intrinsic value? What rules or standards do you apply when using these tools?
4. Could you comment on the matter of intrinsic value as it applies to some of the Inevitables?
5. When you estimate intrinsic value in capital intensive companies like McDonald's and Walgreens where a very healthy and growing operating cash flow is largely offset by expenditures for new stores, restaurants, etc how do you estimate future free cash flow? And at what rate do you discount those cash flows?
6. Is the skill of judging risk just as important as calculating intrinsic value?
7. What valuation metrics do you use?
8. What do you think of the use of book values in making investment decisions?
9. If you can’t talk with management, and can’t read the annual report, and didn’t know the price, but could only look at the financial statements, what metric would you look at?
10. How do you think about growth rates when you value businesses?

>>> back to the top.

How to Think About Businesses

1. What's your philosophy in buying businesses?
2. What is the ideal business?
3. What makes a great business?
4. When you are looking at a business in which to invest, what are your priorities?
5. What makes a company something that you like?
6. What types of businesses have the highest ROIC?
7. What businesses should we avoid?
8. What have been your business mistakes?
9. How do you determine what is the proper price to pay for the business?
10. What do you do if business changes are recognized?
11. Do you know of any examples of companies that have lost and regained their competitive advantage?
12. Impact of regulation on businesses?
13. Would you comment on the quality of earnings in capital-intensive businesses, like utilities?
14. Please talk about the shift to investing in capital intensive businesses and the ultimate impact on intrinsic value. Help us understand the time value of the necessary capital expenditures.
15. How do you place a value on intangible assets? What are the signs of great “moats” around a business and great managements? Do you place a dollar value on this? What discount rates do you use?
16. Not too long ago, a reasonable person might have concluded that Kellogg and Campbell Soup had big moats around their businesses, but that has proven not to be the case and their stocks have languished. What might we learn from this?
17. What's your opinion of downsizing and outsourcing?
18. Can you comment on the impact of rising commodity prices on margins?
19. Could you explain a little more about the mind of the consumer and the nature of the product? And explain how you actually apply these concepts to find the companies with the best potential?
20. What do you think the best quality is in a business or a person?
21. How do you grow a small business into a big business?
22. How do you build the culture of a new organization or change that of an existing one?

>>> back to the top.

Alternatives to Common Stock

1. Your opinion on derivatives? (2003)
2. What are your views on derivatives and how do you think they have affected the global market?
3. What's your opinion of stock options?
4. Would you use stock options to enter a position in a public company?
5. What's your opinion of gold as an investment?
6. When would you exchange shares for gold?
7. What is your opinion on exchange-traded funds and how to do you accurately judge them?
8. Muni bond defaults you described in 2008 -- they haven’t materialized. Should investors worry about getting higher returns?
9. Experience with junk bonds?
10. There are discounts in the fixed income market. Will you take advantage?
11. Can you give us your insights on the oil and silver markets?
12. Investing in ethanol?
13. Any comments on commodities?
14. What are the future trends in coal? Does the cost advantage outweigh the environmental impact?
15. Could you comment on your currency position?
16. Do you hedge and what are your thoughts on the U.S. dollar?
17. What are your views on the dollar?
18. Early on in you career you bought some land and then rented this out to some local farmers? Why didn’t you pursue this type of investment in real estate?

>>> back to the top.

Accounting, Corporate Finance, & Investing

1. What adjustments to reported earnings do you make?
2. Recommendation of a book on accounting?
3. What can be done to improve the accuracy of financial statements of financial institutions? What can be done to improve the integrity of financial statements?
4. Would you comment on companies you say use questionable accounting practices to make their operations look good?
5. What does it mean to own stock in a company?
6. Where can you buy stock with the cheapest commissions?
7. How do you know when you are going to lose money and when you aren't? Since the stock market changes every minute.
8. What's the role of the board of directors?
9. Your thoughts on EBITDA?
10. Opinion on share buybacks? and dividends?
11. Why do you not believe in dividends when Benjamin Graham believed in them?
12. Your thoughts on inflation?
13. Do you see deflation as a threat to our investments?
14. What's your opinion of Enron and creative accounting?
15. What's your opinion of day trading?
16. What's your opinion on asbestos liability?
17. What are your thoughts on short selling?
18. Opinion on IPOs?
19. Are corporate jets a waste of shareholders’ money?
20. Can you forecast the continuing debate between Efficient Market Theory (EMT) proponents and value investors? Are your designated successors “outliers” as well?
21. How did you get to be so rich?
22. What is your unified principle?

1. Thoughts on banks willingness to deal with shady characters?
2. Risk of holding assets at banks or brokerage houses?
3. Any comments on the behaviour of accountants in tax avoidance schemes?
4. Does protection of the banking system warrant the lack of public disclosure in Bank of America’s purchase of Merrill Lynch?
5. What is the main contribution to the stock market crash of this century?
6. Are investment banks so complex that the head is not aware of the risks?
7. What are the risks in the financial system?
8. What can we learn from past blow-ups?
9. Do you think the bankruptcy process should be reformed?

1. Insurance pricing and risk?
2. How do you manage insurance risk?
3. Can you comment on the consolidation taking place internationally in the insurance industry?
4. How do you price super cat insurance policies?
5. Could you comment on fraud in the insurance industry?

1. Opinion on the likely housing bubble? (2005)
2. How do you feel about the current real estate environment?
3. Your views on the securitization of real estate?
4. Where do you see the residential real estate market going in the next year or two?
5. Can you comment on the subprime market?

>>> back to the top.

Foreign Investments

1. What's your opinion on investing in foreign stocks?
2. What are your requirements for investments outside the U.S.?
3. When looking at other countries Mr. Buffett, do you look at the country’s overall financial status or do you look at the financials of that specific company in a foreign country? You mentioned investing in Korean companies – do you ever look at the state of the country you are investing in?
4. 1/8th of world is in India. Why aren’t you investing in India?
5. How large is the universe of companies whose intrinsic value you know? Why invest in South Korea or China?
6. Investing in Brazil?
7. Investing in Russia?
8. Investing in Africa?
9. May I ask you your reasons for coming to Germany?
10. Are you concerned with the effects of foreign economies and their weak currencies? These have played a role in Coca-Cola’s profitability recently - and Coke is trading at P/E multiple of 75. (1999)
11. Do you foresee Berkshire buying any businesses in India or China in the near future?
12. Please talk about Greece, the future of the Euro and fiscal discipline in the world. Greece and other countries are clearly in trouble and BRK has investments in Europe. How is BRK positioned for currency failures? What is your advice to investors regarding the future of the Euro?
13. What is most important thing you learn from China?
14. How will Buffett invest in China in the future? What will happen to the purchasing power of China’s large holdings in U.S. Treasuries?
15. Why is car insurance business not expanding globally? Why not China?
16. What are your thoughts about Japan?
17. Does the Japanese economy affect your outlook?

>>> back to the top.

The Investment Industry

1. Is the individual investor even capable of assessing the riskiness of securities given the large number of institutions/hedge funds in the market?
2. What do you think about all the money flowing into private equity and hedge funds? And do you see the future of buying businesses changing based o­n the considerable increase in private equity activity?
3. What do you think about how most money is managed?
4. Advice for finding good investment advisors?
5. Comments on the mutual fund scandal? (2004)
6. Why don't you start a mutual fund?
7. Opinion of money management as a job to aspire to?
8. What's your opinion of the wider money management industry?
9. What effect does large institutional ownership have on stock price volatility?

>>> back to the top.

Industries

1. Do you invest based on trends or sectors?
2. What do you think about the utility industry?
3. What do you think of utilities?
4. In the domestic soft drink model, is it winner take all, or is there room for three competitors?
5. What do you think of the airline industry?
6. What do you think of the banking business model?
7. You’ve recently invested in Goldman Sachs and GE. Is the financial sector a good buy right now?
8. Opinion on the gambling industry?
9. Opinion on the healthcare industry and its costs?
10. Berkshire has invested in several insurance companies, would you go into the health insurance business?
11. Have you ever considered concrete as an understandable business for investment purposes?
12. What do you think of the telecoms industry?
13. Your opinion on the auto industry?
14. What's your view of the newspaper industry? versus other media?
15. What are your views on the railroad industry?
16. When do you expect to see a return on investment in wind farms and other alternative energy sources?
17. What industry will be the next growth driver in the 21st century and what do you see that supports that?

>>> back to the top.

Specific Businesses

1. What was your thinking behind the purchase of Berkshire Hathaway?
2. What is your analysis of Coca-Cola?
3. Is it really a good idea to buy stocks in unhealthy products? e.g. Coca-Cola
4. How do you distinguish the Cokes of the world from the Proctor & Gambles of this world?
5. Opinion on Coke and Gillette? (2002)
6. Coke and Gillette are off something like 30% from their highs. Do you still consider them exciting businesses?
7. What did you think of the Calpers/ISS proposal that you should not be on Coke’s audit committee?
8. Does McDonald's have the ability to dominate like a Coca-Cola or a Gillette?
9. Would you buy McDonald’s and go away for twenty years?
10. Could you comment on more on McDonald's.....how does it stack up on the inevitables?
11. Opinion of Procter & Gamble?
12. Reasoning behind the PetroChina investment?
13. Reasoning behind the National Indemnity investment?
14. Reasoning behind the HomeServices investment?
15. Reasoning behind the Geico investment?
16. Reasoning behind the Iscar acquisition?
17. Update on NetJets?
18. What was the thinking behind the McLane purchase?
19. How did the Clayton Homes purchase come about?
20. Thinking behind the investment in Anheuser-Busch?
21. Could you talk us through your thinking of the acquisition of Larson-Juhl?
22. BYD [Buffett’s recent Chinese investment] seems like a speculative or venture capital investment, instead of a “value” investment. Could Buffett explain?
23. Why did you invest in Harley-Davidson?
24. Opinion of Fannie Mae and Freddie Mac? (2001)
25. Opinion on Fannie Mae, Freddie Mac and Other Highly Leveraged Financial Institutions? (2003)
26. How did you decide to invest in Salomon?
27. Is it true that Salomon almost caused a global financial crisis?
28. You were rumored to be one of the rescue buyers of Long Term Capital, what was the play there, what did you see?
29. I cannot buy See’s Candies in Bonn Germany. See’s Candies vs. Lindt. Sees’ has a 20% profit margin; their growth is okay. Lindt does 14%, but is now global. Which is better, high profits with low growth, or high growth with lower profits?
30. Could you give a post-mortem on the Gen Re acquisition?
31. General Electric and Goldman Sachs: GE has a history of trying to manage earnings. Do you regard GE and Goldman as attractive businesses or attractive securities?
32. Swiss Re - I'd like to know about its float and risks. How can you be comfortable with the situation?
33. Goldman Sachs - Every year you use clip from Solomon Crisis where you warned Solomon’s employees that you will be ruthless if reputation if the firm stained. Clearly GS has lost reputation. What is your reaction to the lawsuit, its affect on your GS investment, and what advice you have now for GS based on your experience at Solomon?
34. On Goldman, if Lloyd Blankfein had to leave, who would you like to see run GS, were you made aware of the Wells notice, was it material, and would you have disclosed it? Have you been contacted regarding Galleon investigation?
35. BNSF deal. You have discussed the certainty of allowable returns in the industry. How are these calculated?
36. Moody’s had potential conflicts of interest. Why do you retain Moody’s in Berkshire’s portfolio? Why didn’t you use your influence to address Moody’s perceived problems?
37. The tobacco industry has been under fire recently for its unhealthy products. Does this potential exist for Berkshire Hathaway holdings of Coca Cola, Dairy Queen and See's Candies? Is there a potential risk of loss of intrinsic value of these companies due to the current health concerns?
38. Wells Fargo was a good deal at $9 per share, but AIG, the Irish banks, Fannie Mae, and Washington Mutual got there, and weren’t. How do you know the difference?
39. Wells Fargo reportedly wanted to decline TARP funds, and its Chairman, Dick Kovacevich, referred to the TARP as an “asinine” government program. Do you agree with the Wells’ chairman, Charlie? And Warren, do you agree with Charlie?
40. What are the economic characteristics that make Kraft a good business?
41. Kraft, how would you grade Kraft board and compensation. CEO’s $23m?
42. Could you give some specific numbers that relate to Coca Cola, Executive Jet, and some of the other acquisitions?
43. Can you quantify the return on advertising spending at GEICO?
44. To what extent should preferred shareholders and debt holders of GM and Chrysler should be exposed to losses in the restructurings of those companies?
45. What is your opinion of the prospects for the Kmart/Sears merger? How will Eddie Lambert do at bringing Kmart and Sears together?

>>> back to the top.

Berkshire

1. What explains the extraordinary success of Berkshire Hathaway?
2. Over the years, what has Berkshire Hathaway come to mean to you?
3. What is the intrinsic value of Berkshire? Can you use book value as a guide to company valuations?
4. How do you manage Berkshire Hathaway?
5. What do you tell your managers at Berkshire?
6. What is your fondest hope for Berkshire?
7. What can go wrong at Berkshire?
8. What is Berkshire's cost of capital?
9. You've targeted Berkshire Hathaway's book-value growth at 15%. You have come through at about 24%. That is a big gap of 9% between your modesty and the outcome. Why is there such a big gap?
10. Why don't more people copy Berkshire as an investment vehicle--a corporation that pays no dividend?
11. What would Berkshire be like if you hadn't met Charlie Munger?
12. What happens when CEOs call you?
13. How to evaluate Berkshire or MSFT if it does not pay dividends?
14. Reporting on Berkshire?
15. Why don't you meet with analysts or large shareholders?
16. Why did BRK buy so many debt instruments during the crisis period as opposed to equity?
17. In the Annual Reports, look-through earnings, and unaudited financials, are no longer included. Why has it changed?
18. Berkshire has best and most loyal investors. How do you attract and retain a shareholder base
19. What is the current acquisition appetite and outlook? Has the phone been ringing?
20. There are a lot of questions you do not get asked. So, what questions would you ask yourselves regarding BRK’s financials?
21. What would BRK’s exposure be in another global financial meltdown?
22. What economic laws have worked best for Berkshire?
23. What’s the cheapest form of financing for Berkshire Hathaway? Would it make sense to issue bonds right now?
24. Do you have an opinion on whether BRK should or shouldn't be included in the S&500? (1999)
25. How much has Berkshire Hathaway done in the way of philanthropy?
26. Can you tell us what are your goals and expectations for the value of Berkshire Hathaway?’s float?
27. Why has Berkshire Hathaway avoided the life insurance business? And also, can you explain why there are discounts on A or B shares from time to time?
28. How does Berkshire compensate its managers?
29. Do Berkshire's Manager's Enjoy Coming to the Annual Meeting?
30. Your successor at Berkshire?
31. Succession at Berkshire?
32. How did you select the four investment professionals who could succeed you in the CIO [Chief Investment Officer] position?
33. How did the four CIO candidates perform last year, did they use leverage? (2010)
34. How did the four investment managers waiting “in the wings” to eventually replace you perform in 2008? How would you rate these managers? Are all four still on the list?
35. Why are you reluctant to bring in your [CEO] successor now? Why not train him now?
36. Does Berkshire have a succession plan for Ajit Jain (the head of Berkshire’s insurance operations)?
37. Your opinion of Google's emulation of Berkshire's Owner's Manual?
38. What questions do the BRK audit committee ask the auditors?
39. Berkshire's board and corporate governance?
40. Given you [Buffett and Munger] are Berkshire’s sustainable competitive advantage, would you invest in Berkshire now?
41. What is the impact of Berkshire losing its AAA rating? What will it take to restore it?
42. Do you have a target rate of growth for Berkshire, given its size? Greater than 20% seems unlikely.
43. Could you comment on union and other contracts at Berkshire subsidiaries?
44. What is the worst-case scenario for Berkshire's insurance business?
45. Could Buffett share his attitude toward layoffs and job security at Berkshire subsidiaries?
46. What's the interview process for Berkshire managers?
47. You are giving a lot of BRK stock to the Gates Foundation each year and they are selling. Won’t the foundation selling create downward pressure on the stock?
48. Managers are allowed to operate without interference with Omaha. What would happen if BRK found illegal activity? Would they intervene?
49. How is BRK ok with models used by its insurance companies after the widespread failure of models during the financial crisis? Are they different and/or safer than the ones that failed Wall Street?
50. Please discuss some of the synergies among BRK companies and whether or not you encourage companies to do business with one another. e.g. At my local Dairy Queen, they don’ t accept Amex, and they still sell Pepsi.
51. If one day I apply as manager to Berkshire company, what should I work on now, and what should I do to become your successor?
52. You stated your policy about retaining earnings in the 1984 annual letter. Would a distribution be warranted based on 2005-2009 stock performance?
53. Can you comment on Berkshire's holdings? (2005)
54. Why don't you split the stock?
55. Berkshire has bought a lot of shares in the last twelve months of listed companies (2008). Do you expect returns to be between 7-10% over many years? Well below your achievements in the past.
56. How do U.S. government guarantees hurt Berkshire competitively?
57. Why shouldn't shareholders sell their Berkshire shares and buy what you're buying?
58. What safeguards are in place against breaking up Berkshire?
59. How do you stop Berkshire subsidiaries hording capital?
60. What do you see as the net effect of government interventions on Berkshire’s business? Will there be new rules of the game?
61. Does Berkshire hedge its currency exposure?
62. What is your level of involvement when the company has an ethical dilemma? For example, Fruit of the Loom’s competitors have sweatshops.
63. Can you comment on the protests by Salmon Fisherman of PacifiCorp’s Dams on the Klamath River?

>>> back to the top.

The Market

1. Views on the market and where it's going?
2. Opinion of forecasts?
3. Comment on the 1998 market?
4. Do you think the current rally is for real? (Nov 2009)
5. What do you think of the current market? (2000)
6. Mr. Market is valuing Dow Jones at about 7000, and the S&P at about than 800. What is a fair valuation? (1997)
7. The S&P 500 has a return on equity of 22%, compared with a 12-13% average for corporate America over the past decade. How did we get to this point of extraordinary profitability? (1997)
8. Back in the Sixties, you disbanded the Buffett Partnership when you perceived the market to be overvalued. If you had only 100 partners in Berkshire Hathaway, would you disband it? (1999)

>>> back to the top.

Management

1. What are the first things you look for in a management team?
2. What are three traits of successful managers?
3. What do you look for when you hire someone? What specific qualities do you seek?
4. Machiavelli said that a man could be feared and loved. But one might want to be more feared than loved. Do you agree with this? Has there ever been a situation where you had to be more feared than loved?
5. It has been well documented that you don’t manage your managers. Do you possess a strong intuition about people or do you have a process when you evaluate the management of companies that you are looking to purchase?
6. If two people had the same knowledge base but one had two-years experience and one had ten-years experience, which one would do a better job?
7. Any advice for spotting crooked managements?
8. What qualities in managers set them apart as great leaders, in essence, where do you find the right balance between "hard" and "soft" skills?
9. Should managers learn about investing?
10. Your thoughts on management compensation? Management compensation in a cyclical industry?
11. How important are managers?
12. I am bad at hiring good managers. How do you assess a person’s capabilities?
13. You take great pride in keeping your schedule wide open. Do you believe that corporate America is overscheduled and overstretched?
14. Has the financial and economic crisis changed the integrity of management?

>>> back to the top.

Technology

1. I have worked in various technologies businesses, but I understand that you do not typically invest in the technology sector. Why is that? How do you view technology as an individual and as an investor?
2. With speculation in the high tech area, what are your views on a crash? (2000)
3. Are you worried about technology affecting investing?
4. Because of the Internet, certain stocks will show great revenue and income growth like AT&T and Nokia. Would you consider investing in the telecommunications industry this way? (1999)
5. Can you comment on how technological advances affect us financially?
6. Why don't you use Bill Gates to invest in tech stocks?
7. Won’t Microsoft be doing software development ten years from now, just like Coke will be selling soda? Doesn’t that make it a candidate for investment?

>>> back to the top.

Education

1. What is your opinion of the importance of technology in business education today?
2. Could you comment on the state of financial literacy? Is there anything that could be added to educational curricula to improve it? What should future generations know?
3. What can be done to educate children of financial management, and prevent future financial mayhem?
4. Do you think an MBA is an important degree for students to have today?
5. What do you remember about your education at the University of Nebraska?
6. You began you university education at another institution, what are you thoughts on the education you received at the University of Nebraska?
7. What's the one thing that your MBA didn't prepare you for when you got out into the real world?

>>> back to the top.

Personal

1. How would you define your character? And what portion of your character do you believe contributed the most to your success?
2. After all your accomplishments, what legacy do you want to leave behind?
3. What led you to develop your values and goals at an early age?
4. Are you a goal oriented person? When you were in college did you set goals for yourself?
5. Your goals were financial in college?
6. Who are your heroes?
7. What goals do you set for yourself today; do you have goals you still want to accomplish?
8. How do you spend your day?
9. What do you read?
10. How do you define happiness and what about your life makes you most happy?
11. If you could have lunch with one person you have never met, who would it be and why?
12. How do you stay so down to earth and humble? Are there specific people or lessons you have learned throughout your life that enable you to maintain this outlook?
13. What are some of your biggest mistakes or regrets?
14. How do you think differently today than you did twenty years ago? Where do you expect to see the greatest differences in 2030?
15. Why are you frugal?
16. What would you do to live a happier life if you could live over again?
17. What keeps you up at night?
18. What do you think were the major qualities that you have that distinguish you from the majority?
19. What was your reasoning behind your huge contribution to the Bill and Melinda Gates foundation?
20. If you could come back again, would you want to be Warren Buffett?
21. What's your view of inheritances?
22. What feedback mechanisms do you have in place
23. Your friendship with Charlie?
24. Why don't you charge a percentage management fee to Berkshire, given that you earned 25% of the profits above 6% each year when he ran the Buffett Partnership. Is it because you believes, as you've said before, that "it's better to give them to receive"?
25. Who are your current role models?
26. What's the motivation behind giving your fortune away? your philanthropy?
27. Would you rather have dinner with John Adams or Ben Franklin?
28. Why do you support Planned Parenthood?
29. What is the best question you've ever been asked?
30. Has there been any question that you haven’t been able to get a comfortable answer to that also can’t go in the “too difficult” pile?
31. How do you maintain your good mental and physical health?
32. Your comments on Phil Fisher?
33. What do you think and know about Carlos Slim?
34. Do you believe in Jesus Christ?
35. Is it fun inventing something that inspires young kids?
36. I know you like baseball. My favorite team is the Chicago Cubs. Would you like to buy the Chicago Cubs from Sam Zell? Is it a good investment?
37. Will you share what or who had the biggest influences on you?
38. You have said that your assistant pays a higher tax rate than you does and that to be equitable the tax rate should be higher on you than on others. In reality, the bulk of estate will not be taxed due to your charitable donations. How do you change the system so people like you pay more tax?
39. Could you please share your views on why legislators should not change the inheritance tax law?
40. Is all your media exposure the best use of your time?

Advice

1. I worked in the paper and packaging business this past summer and really enjoyed my experience. None of my classmates are interested in the paper business and the company I worked for has not had MBA interns in years. Clearly the paper business has its challenges, but do you see this as an opportunity or a roadblock?
2. What is the value of good leadership skills and ethics in business?
3. What advice would you give students who are preparing for a business career?
4. What advice would you give students who are just starting out in a business career?
5. At the Wesco annual meeting last year, Charlie said, "The best way to get success is to deserve success". Do you recall anything from your experience which best demonstrates how you were able to position yourself to deserve success, and do you have any advice for students on how they can position themselves to deserve success as well?
6. What advice would you give the average person in the U.S.?
7. What general advice would you give?
8. What graduate school would you recommend and whom would you recommend to study with in the area of investments?
9. What's the best way to prepare for the future?
10. Importance of maths? Why does math reflect reality?
11. Are there any up-and-coming role models we should study?
12. Can you comment on the student visits to Berkshire? and more widely on investment education?
13. What should I do with my life?
14. What advice would you give to the quieter, introverted population, in order to raise their visibility and gain the recognition they deserve?
15. I’m 12 years old. There are a lot of things they don’t teach you in school. What things should I be looking into?
16. I have four children. Can you give them advice about keeping up with the Joneses?
17. What exactly does it mean to be financially successful? How can one properly prepare themselves for the economic future?
18. I started babysitting and I am really happy to get the money and put it in my saving's account but I want a raise. How should I ask?
19. How can I figure out what to be in life if there are so many choices?
20. My mom says I should save my money, but I want to buy a video game. What do you think?
21. I teach at a community college in Florida, teaching students to invest in themselves. Financial independence and freedom. Slow and steady wins the race. Law of reciprocity. Etc, etc, etc. What else should I be doing?
22. What advice do you give to young entrepreneurs? I am starting a business, and I want it to be successful. Aristotle, when asked definition of wealth, said it is he who spends less than he earns.
23. What's a good thing to buy and than sell for a profit? For example candy or something in that nature?
24. I want to start my own business, what should I do? A car wash?
25. What are the best ways for a 10-year-old to earn money?
26. Partly because of marrying well, I am able to manage the money of my husband and myself full time. I wanted to ask a diversification question. Each of us has a traditional and a Roth IRA. Should the assets in those accounts be separated, or managed as a single entity?
27. Imagine you are investing with small sums of money at 30 years old, with your first $1 million. Your savings can cover expenses for 18 months. You are not a full-time investor. What advice do you have, please be as specific as possible. What asset classes and what percents?

The Big Picture

1. What do you believe are the greatest successes of capitalism?
2. What do you see as the shortcomings of capitalism?
3. How should we take care of those who are harmed by the system, like your former textile mill workers?
4. With the recent changes in the global political economy and surges in terrorist activity, some would argue that uncertainty is increasing for all types of global markets. Where do you think things are heading and how should we deal with this heightened uncertainty?
5. What kind of impact will the demographic shift (i.e. baby boomers) have on the United States?
6. Do you believe that the Federal Reserve is fostering moral hazard thereby leading to the misallocation of capital and subsequent asset bubbles? If so, what are the long term risks?
7. Could you comment on the current rise of sovereign wealth funds from theMiddle East and Asia and how they are playing an increasing role in how corporations raise capital. Is competition from these sources for the cash flows of corporations affecting your investment strategies or opportunities?
8. It seems that the worldwide trend is towards lower corporate tax rates. Do you think that the US risks becoming less competitive if it maintains its current corporate tax rate?
9. Do you feel that the might of America has changed?
10. What are the biggest challenges that this country faces?
11. What do you think about the U.S. trade deficit?
12. What level of taxation on capital gains is most conducive to the long-term economic health of this society, and is that also the fair and just rate?
13. What's your opinion of oil? peak oil?
14. The current tenuous economic situation and interest rates? Where are we going?
15. What was the impact of September 11th?
16. Could you use your clout to advocate for tort reform?
17. Views on growing income inequality?
18. Thoughts about the odds of a nuclear attack?
19. Opinion on immigration?
20. Opinion on social security?
21. Opinion on public education?
22. Views on the U.S. Current Account Deficit?
23. What do you think the likelihood is of a major credit contraction?
24. The state of Florida getting into the insurance business?
25. What's your opinion on global warming? climate change?
26. What's your opinion on politics, elections, and the political system?
27. Maybe there should be a Buffett/Munger Presidential ticket. Please name three difficult policy decisions and three perfect solutions to better the country.
28. Can volunteering help the economy? If so, then why aren't people doing it? I stick to my motto if you see something that needs doing, do it.
29. Should the U.S., and U.S. companies such as Coca-Cola, withdraw sponsorship of the Beijing Olympics because of humanitarian values?
30. Why is it that Americans do not save, and what can we do?
31. What is the future of mass transit?
32. Is there a chance the CDS [Credit Default Swap] market may eclipse subprime?
33. How do you envision a nationalized healthcare system, and how it would affect Berkshire’s portfolio?
34. Would the government’s stimulus spending be better spent acquiring national infrastructure, as during the Great Depression, in order to put people to work?
35. Will retail, manufacturing and service businesses still be below their 2007 levels three years from now, given how they have been affected by the recession?
36. What problems do you see in the world economy?
37. Financial reform, what are the good ideas, and what are the bad ideas?
38. The leading cause of death among young people is car crashes. BRK insures many of these crashes. New technology is helping give people feedback on their driving. How are GEICO and the Gates Foundation positioned to help save lives and improve this technology?
39. What is biggest challenge facing the US economy – what are implications of that for investing globally over next decade?
40. We need hope and jobs. Can you help?
41. Given that we are not out of the woods yet in terms of the economy and the financial system, how would you assess the current buying opportunity for stocks?
42. Is there a way to create synergies between BRK companies to promote solar solutions?
43. Rail business – does our country need high speed passenger rail? Private or public?
44. What would be impact on portfolio of a Chilean size earthquake in LA or SFO?
45. How do you hope to tackle administrative costs when it comes to Aids treatment in Africa?

Selected books by Benjamin Graham

(in chronological order- with selected reviews and remarks)

• Security Analysis HG4521.G67 1934 (and various editions)
• Storage and Stability: A Modern Ever-Normal Granary HC106.3.G681 1937 “Storage and Stability: A Modern Ever-Normal Granary” (Review) Frank D. Graham
• The American Economic Review, Vol. 28, No. 3. (Sep.,1938), pp. 575-577. “Storage and Stability”. (Review) J. G. Smith
• The Economic Journal, Vol. 48, No. 190. (Jun., 1938), pp.300-302. “Storage and Stability: A Modern Ever-Normal Granary” (Review) Don S. Anderson
• The Journal of Political Economy, Vol. 46, No. 3. (Jun.,1938), pp. 435-437. “Storage and Stability, A Modern Ever-Normal Granary”. (Review) Asher Hobson Benjamin Graham; Alvin Johnson
• Journal of the American Statistical Association, Vol. 34,No. 207. (Sep., 1939), pp. 597-599. “Sagacity and Securities,” Louis Rich, New York Times, Dec. 2, 1934.p. BR13. “Security Analysis” (Review) E. A. Kincaid
• The Accounting Review, Vol. 10, No. 1. (Mar., 1935), pp.127-128. “Security Analysis” (Review) D. F. Jordan
• The Accounting Review, Vol. 15, No. 4. (Dec., 1940), p.539. “Security Analysis: Principles and Technique”.
• (Review) James E. Walter The Journal of Finance, Vol. 18, No.4, Dec. 1963, pp.712-713.

InvestorLit Research: Stocks vs. Bonds (May 2013) Bruce Grantier, founder of InvestorLit (www.investorlit.com), focuses on the allocation between stocks and bonds in this review. With investors at what he describes as a generational juncture, the overwhelming evidence now favors stocks over bonds. Please click on the link above to read the full article. [RESEARCH ABSTRACT]

Value vs. Glamour: Emerging Markets (April 2013) According to the International Monetary Fund, emerging markets now represent more than a third of global GDP—and are expected to grow at a faster rate than advanced economies.* With such explosive growth, investors often assume that an investment strategy focused on growth would yield better results. Yet, the results from the Brandes Institute’s Value vs. Glamour: A Global Phenomenonstudy show strong evidence of a value premium in developing countries. This study shows that value stocks in emerging markets have:

• Outperformed glamour stocks over the long term • Experienced similar price volatility as glamour stocks • Participated more in positive markets than glamour stocks • Fared better during down markets than glamour stocks

Value vs. Glamour: A Study of the Indices (February 2013) By examining returns for U.S. stocks from 1968-2012 and stocks outside of the United States from 1980-2012, the Brandes Institute’s Value vs. Glamour: A Global Phenomenon study reveals a consistent value premium across valuation metrics, geography and market capitalizations. But what about commonly used benchmarks? Would a comparison between Value and Growth indices yield similar results? Now updated through December 2012, this study examines large- and small-cap value and growth indices around the globe and presents evidence of a value premium within common benchmarks over the long term.

ETF Structure and Practice: Potential Issues or Popular Myths? (December 2012) This paper combines excerpts of select, existing studies and comments from industry experts to debunk certain myths about the dangers of investing in exchange-traded funds (ETFs) and to highlight possible issues for individual and institutional ETF investors. We seek to provide the basis for measured questions that thoughtful ETF investors may pose regarding investments already made, or being considered. [RESEARCH ABSTRACT]

Value vs. Glamour: A Global Phenomenon (November 2012) In previous versions of our Value vs. Glamour study we have explored the historical performance of stocks based on their fundamental characteristics and quantified a value premium. Expanding on the work of noted academics, we extended the scope of their research to determine if the value premium was consistent across global markets. In this update, we expand our study through 2012 to include the recent worldwide economic downturn. We also examine if value investing has worked in emerging markets over the long term.

The Key to Long-Term Success: The Income Component of Returns (November 2012) During the last two decades of the twentieth century, the investing world saw declining dividend and bond yields, while prices for both equities and bonds rose. In the early years of this century, investors seemed to belittle the importance of income as a component of returns, focusing primarily on the potential for capital gains. In this paper, The Brandes Institute investigates income’s role as a component of total returns based on 86 years of financial asset performance.

[RESEARCH ABSTRACT]InvestorLit Research: Behavioral Finance and Investment Management (July 2012) Bruce Grantier, founder of InvestorLit, shares first-hand experience with the effects of biases on investment decision making—and how to counter those biases. He also summarizes Behavioral Finance and Investment Management, a CFA Institute-published book. Among his conclusions: “Investors should be quite careful about modern portfolio theory” and “…fears often are mistaken or inflated, causing investors to react reflexively, often to their detriment.” Please click on the link above to read the full article.

Broad is the New Narrow: How Passive Investing Creates Concentrated Portfolios (April 2012) Passive investing, particularly in emerging markets, has become an increasingly popular means of quick, “diversified” exposure to a particular segment of the markets. Defensive investors, as Benjamin Graham noted, would be best served owning a diversified list of leading companies. Yet it’s the presumption of diversification that can lead investors astray. Many passive investments are, in fact, extremely concentrated owing to the disproportionate size of its largest holdings and blindly weighting by market capitalization. With emerging markets now the largest region of the equity markets by number of investable securities, they offer opportunities for investors willing and able to invest actively outside of the largest securities.

Boomers Behaving Badly: A Better Solution to the Money-Death Problem (January 2012) The biggest single financial worry for American workers may be “money death,” the fear that they will run out of money during retirement. Americans within 10 years of retirement number 60 million and are forecast to grow to more than 75 million within the next decade. Investment strategies for retirement rooted in conventional wisdom or extrapolated from successful past approaches may no longer be ideal for healthy and wealthy Boomers. Supported by a proprietary modeling tool—the Brandes Retirement Simulator—we are able to estimate wealth outcomes based on personalized financial and lifestyle inputs. The results suggest that the baby-boomer generation should consider contrarian strategies, including equities and fixed income assets with higher-return potential to address the “money death” problem. Please click on the links below to view the video, research summary or to use our online retirement simulator. You can also click on the link above to read the original research paper.

• Brandes Institute Research on NBC: Barry Gillman of the Brandes Institute was recently interviewed by Sharon Epperson, CNBC Personal Finance Correspondent.

• Research Executive Summary

• Brandes Retirement Simulator: The Simulator allows users to model future income, expenses and investment strategy and simulate a range of possible financial outcomes up to age 100. TheReal Age Calculator used in the Simulator may allow users to make a more accurate estimate of their own future life expectancy.

Volatility: Implications for Value and Glamour Stocks (November 2011) What happens to value and growth stocks when investing after extreme volatility? In this study, we introduce the context of market volatility for value and glamour stock returns. Tracking returns for style indices after periods of extreme volatility, we reveal evidence showing value stocks typically outperformed growth stocks and did so with less variability immediately after periods of high and low volatility from 1980–2011. This paper adds to previous literature by providing another angle for value investing as a potentially successful long-term strategy.

Death, Taxes, and Short-Term Underperformance: Global Equity Mutual Funds (October 2011) In our original Death, Taxes, and Short-Term Underperformance studies, we examined the short-term underperformance of U.S., non-U.S., and global mutual funds. Our research found that investors in equity mutual funds should expect periods of underperformance – both versus the benchmark and relative to peers. Our studies also indicated that even longer periods of underperformance, up to three years, had relatively little impact on some of the better funds’ ability to generate long-term success. In this handout we revisit and update our previous study on short-term underperformance of global equity mutual funds.

The Role of Expectations in Value and Glamour Stock Returns (June 2011) When value and glamour stocks missed earnings expectation targets, what happened to their stock prices over the following year? Prices of value stocks increased when earnings expectations were beat and missed – and even when business fundamentals deteriorated. Glamour stocks behaved more predictably, with prices rising and falling after beats and misses, respectively. In this report, the Brandes Institute investigates the role that expectations played in investors’ assessment of value and glamour stocks to better understand the sequence of events that allowed value stocks to deliver superior long-term returns. The evidence suggests an undercurrent of behavioral error, counters assertions published by select scholars, and provides fresh evidence explaining why value investing historically has been a successful long-term strategy. This is a preprint of an article whose final and definitive form has been published in The Journal of Behavioral Finance© [2011] [copyright Taylor & Francis]; The Journal of Behavioral Finance is available online at www.informaworld.com

Broad is the New Narrow: How Passive Investing Creates Concentrated Portfolios (April 2011) Passive investing, particularly in emerging markets, has become an increasingly popular means of quick, “diversified” exposure to a particular segment of the markets. Defensive investors, as Benjamin Graham noted, would be best served owning a diversified list of leading companies. Yet it’s the presumption of diversification that can lead investors astray. Many passive investments are, in fact, extremely concentrated owing to the disproportionate size of its largest holdings and blindly weighting by market capitalization. With emerging markets now the largest region of the equity markets by number of investable securities, they offer opportunities for investors willing and able to invest actively outside of the largest securities.

Equity Dispersion: Value Stocks Yet to be Rewarded (January 2011) The correlation of returns for various equity asset classes has been high. In addition, the range or “dispersion” of returns across asset classes – and across sectors within those asset classes – has been low. These factors have made it difficult for active managers to outperform. But dispersion of valuations remains relatively wide by historical standards, creating a fertile environment for value-based stock pickers. When return dispersion broadens or returns to more normal levels, these undervalued securities may outperform the broader market.

New Insights into the Case for Emerging Market Equities (December 2010) While high growth economies in emerging markets tend to attract attention, recent research concludes that valuations were the key driver in historical equity performance in developing markets. In this updated paper, we share academic research that finds no discernable relationship between GDP growth and subsequent equity performance. We also review research demonstrating how emerging market stocks with the lowest valuations have tended to outperform those with higher valuations. Value vs. Glamour: A Global Phenomenon (December 2010) In 1994, Josef Lakonishok, Andrei Shleifer, and Robert Vishny published a landmark study investigating the performance of value stocks relative to glamour securities in the United States over a 26-year period. Their research concluded that value stocks tended to outperform glamour stocks by wide margins. The Brandes Institute subsequently updated their work and extended the scope of the initial study to include non-U.S. markets to determine if the value premium was consistent across global markets. Now updated through June 2010, the study includes both the glamour-driven markets of the late 1990s and early 2000s, as well as the more recent worldwide economic downturn.

Dividend Yield and the Implications of Cash Sitting on Balance Sheets (November 2010) Robust cash flow yields for large-cap stocks have reached unprecedented territory in 2010 in relation to both investment-grade and junk-bond yields. In this article, Brandes Institute Advisory Board Member Bill Raver examines how these cash flow yields suggest stocks offer compelling potential for capital return and appreciation for shareholders. Mr. Raver also examines the record cash levels sitting on the balance sheets of public companies and the impact an increase in dividends and share buyback activity may have on performance and liability obligations going forward.

Risk Management and its Application in the Portfolio Management Process at the Ontario Teachers’ Pension Plan (September 2010) Since the financial crisis that started in late 2007 and lasted throughout 2008 and early 2009, many have criticized quantitative risk management systems. Zev Frishman, Vice-President of Global Equity Strategies with the Ontario Teachers’ Pension Plan (“OTPP”) and Brandes Institute Advisory Board member, suggests it is not the concept and principle that are at fault but rather the reliance on poor systems or poor understanding and application of quantitative systems. In this paper, Mr. Frishman shares how the OTPP uses a unique in-house quantitative system to help manage risk.

The Role of Expectations in Value and Glamour Stock Returns – Excerpt (August 2010) When value and glamour stocks missed earnings expectation targets, what happened to their stock prices over the following year? While prices for glamour stocks fell as expected, prices for value stocks went up – even when business fundamentals deteriorated, based on results revealed in this Brandes Institute study. These findings counter assertions published by select scholars and provide fresh evidence explaining why value investing historically has been a successful long-term strategy.

This Time is Different: Behavioural Aspects of Financial Crises (May 2010) In “This Time is Different: Behavioural Aspects of Financial Crises,” Brandes Institute Advisory Board member Bruce Grantier reviews the book This Time is Different: Eight Centuries of Financial Folly. With this review, Grantier provides a reminder to investors of the frequency and nature of financial crises and the importance of adhering to enduring investment principles. This article is part of an ongoing series presented by the Brandes Institute addressing the question, “What is Risk?”

Back to the Future: Conventional Investing in a Complex World (January 2010) In the wake of market volatility, many investors may feel a desire to change their approach and be more “nimble” or “opportunistic” in their pursuit of investment goals. In this paper, Robert Maynard, Chief Investment Officer for the Public Employee Retirement System of Idaho and Brandes Institute Advisory Board member, cautions investors who are thinking about abandoning traditional investment plans. He advocates policies that are simple, transparent, and focused rather than adopting increasingly popular “alternative” tactics such as illiquid instruments and vehicles, leverage, and complex, opaque investment strategies.

The Risk of Risk Management: A Roundtable Discussion with the Brandes Institute Advisory Board (January 2010) In the wake of a tumultuous investment period, investors continue to sharpen their focus on risk management. During 2009, the Brandes Institute Advisory Board, comprised of investment professionals working around the globe, shared their thoughts and unique experiences regarding how best to measure and manage risk. In this article, we share excerpts of their conversations that highlight the advantages, inherent limitations, fiduciary implications, and implementation challenges involved with Value at Risk (VaR) and other tools intended to measure and manage risk. This article is part of an ongoing series presented by the Brandes Institute addressing the question, “What is risk?”

Death, Taxes, and Short-Term Underperformance: Non-U.S. Funds (November 2009) Death, Taxes, and Short-Term Underperformance: U.S. Funds (November 2009) Brandes Institute believes short-term underperformance is one the few certainties in life. Now updated through June 2009, these articles illustrate the potential for periods of short-term underperformance. Our research focuses on the performance results of U.S. and non-U.S. mutual funds over the last decade. Observations suggest that underperformance in shorter time periods – such as one quarter, one year, or even three years – is to be expected, even for funds that have performed strongly over the long term. (Note: These articles have been filed with FINRA.)

Value vs. Glamour: A Study of the Indices (October 2009) The Brandes Institute “Value vs. Glamour” studies demonstrate that value stocks have outperformed growth stocks over the long term. But what about commonly used benchmarks? Over the long term, have value indices outperformed their growth counterparts?

Value vs. Glamour Revisited: Historical P/B Ratio Disparities and Subsequent Value Stock Outperformance (September 2009) Value vs. Glamour Revisited Non-U.S. Handout (November 2009) Value vs. Glamour Revisited U.S. Handout (June 2009) The Brandes Institute recently revisited its Value vs. Glamour research, focusing on the relationship between the valuation difference in price-to-book ratios, and subsequent relative performance. The Institute discovered that, historically, when the difference in P/B ratios between value and glamour stocks was at or near its peak, value stocks delivered meaningful outperformance over the subsequent 5-year period. This article documents the recent expansion in the gap between median P/B ratios for value and glamour stocks and examines the implications for investors.

Corporate Credit: An Opportunity on a Global Scale (July 2009) The meltdown in liquidity in the corporate debt market in the second half of 2008, the related widening in spreads, and concerns over use (and misuse) of credit default swaps may have created both cyclical and secular opportunities for fixed income investors.

Benjamin Graham and Risk (April 2009) In “Benjamin Graham and Risk”, Brandes Institute Advisory Board member Bruce Grantier examines the similarities and differences between the modern portfolio theory concept of risk and the writings of Benjamin Graham and other prominent value investors. This article is part of an ongoing series presented by the Brandes Institute addressing the question, “What is risk?”

Is U.S. Small Cap a Viable Alternative to U.S. Private Equity?(April 2009) A number of academic papers have indicated that returns for private equity funds, on average, have not outperformed public equities in the United States. This contradicts the risk premium one might expect with private equity, given the liquidity, transparency limitations, and additional origination costs associated with private equity investments. In this paper, Brandes Institute Advisory Board member Bruce Grantier examines the academic research and historical performance (both on an asset class and manager value-added basis) to evaluate small cap as an alternative investment to private equity.

Risk Evaluation within Asset Management: A Practical Perspective (March 2009) Drawing on his 20 years of experience in the investment industry, Brandes Institute Advisory Board member Peter Branner cites developments that may have contributed to the 2008 financial crisis – and how these “risks” may be better managed. Among the seven aspects of risk he addresses are mark-to-market accounting, an emphasis on relative performance, and short-term underperformance. Branner’s article, “Risk Evaluation Within Asset Management: A Practical Perspective,” is one in a series of Brandes Institute pieces that seeks to answer the question, “What is risk?”

Results from Investors’ Survey Regarding Currency (February 2009) The Brandes Institute conducted an online survey of institutional investors worldwide the week of December 8-12, 2008. In this survey, clients responded to questions on the use of currency overlay programs, the impact of currency on plan assets, and the role of the carry trade in currency markets. The survey results are anticipated to be published in an upcoming issue of Pensions & Investments. The attached summary shares key findings, including areas of material difference between the responses of U.S. and non-U.S. investors.

Death, Taxes, and Short-Term Underperformance: Global Equity Mutual Funds (December 2008) While there may be few certainties in life, the Brandes Institute believes short-term underperformance is one of them. In this article, we study the performance of a wide range of global equity mutual funds over the last decade. Our observations indicate that underperformance in shorter periods – such as one quarter, one year, or even three years – is to be expected, even for portfolios that may have performed strongly over the long term. (This article has been filed with FINRA.)

Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance (November 2008) Investors typically strive to be logical and unbiased decision makers. However, many investors often are subject to innate tendencies that can contribute to less-than-rational decisions. In this light, one would do well to first understand common behavioural tendencies and misperceptions. In this article, Brandes Institute Advisory Board member Bruce Grantier reviews James Montier’s book Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance. The book addresses timely topics such as group decision making, modern finance, and the nature of bubbles. Grantier finds that Montier’s book effectively and convincingly communicates how the brain is hardwired to like short-term gratification (often leading to quick and easy decisions), and to dislike social-exclusion behaviour (often leading to herd-like decisions).

Has the Carry Trade Worked In World Bond Markets? (October 2008) The Brandes Institute paper Carrying On? (published in 2006) documented a currency market inefficiency that had provided the potential to improve investment returns by owning higher interest-paying currencies. In Has the Carry Trade Worked In World Bond Markets?, we test whether this anomaly also was present in the global fixed income markets, using 10-year maturity government bonds. For the full study period (1973-2007) there was no clear pattern. However, when the data is split between the same two periods we used for the currency analysis, a different perspective emerges. For the 1973-1986 period, the higher bond returns were obtained in the low-yielding markets, while the reverse is evident between 1987-2007, with the “bond carry trade” having been more successful.

Value vs. Glamour: A Global Phenomenon (September 2008) In 1994, Josef Lakonishok, Andrei Shleifer, and Robert Vishny published a landmark study investigating the performance of value stocks relative to that of glamour securities in the United States over a 26-year period. Their research concluded that value stocks tended to outperform glamour stocks by wide margins. However, their study did not include the glamour-driven markets of the late 1990s and early 2000s. What effect might this period have on their conclusions? To find out, the Brandes Institute updated their Value vs. Glamour research, now through June 2008, to examine the comparative performance over a 40-year period. In addition, we also extended the scope of the initial study to include non-U.S. markets, seeking to determine if the value premium has been evident worldwide.

Global Small-Cap Stocks: A Life Cycle Perspective (September 2008) In previous research, Global Small-Cap Stocks: Reexamined and Redefined, the Brandes Institute found divergent construction methodologies among global small-cap index providers and introduced a custom series of country and regional small-cap universes to explore detailed historical fundamental data. In the second phase of this research, Global Small-Cap Stocks: A Life Cycle Perspective, we use “life cycle” analysis to sort companies into different phases of development and challenge the notion that international small caps are similar to domestic small caps. In this research, we make a number of interesting discoveries on why international small caps are structurally different from domestic small caps, or even international large-cap stocks.

Structured Products: Asset Backed Securities – Opportunities Resulting from Systematic Mispricing (September 2008) Asset-backed securities have attracted attention in the recent months amid the uncertainty surrounding the mortgage sector and securitized debt. This paper examines the “boom/bust” cycle of subprime mortgage pools, and demonstrates how long standing perceptions of rating agencies and their ratings could potentially be either a risk or an opportunity.

Value Investing: Has It Worked In Emerging Markets? (August 2008) The Brandes Institute’s Value vs. Glamour research has demonstrated the persistent outperformance of value stocks over glamour stocks in developed markets worldwide over long time periods. Investors may wonder if the value premium is also evident in developing countries. In this article, we investigate whether “glamorous” companies in developing countries have outperformed their “value” counterparts over the last few years. We also reveal whether value investing has worked in emerging markets over the long term.

Value vs. Glamour: Bond Performance (July 2008) Previous research by the Brandes Institute has shown the historical long-term performance advantage of value stocks over glamour stocks. What about corporate bonds? Here, we show that bonds issued by value companies have provided greater appreciation than those issued by glamour companies.

The Investor’s Paradox: Making Intelligent Decisions Amid More Choices (June 2008) Having more choices is always a benefit – or is it? In the book The Paradox of Choice (New York: HarperCollins, 2004), Professor Barry Schwartz convincingly argues that the process of making constant decisions amidst a sea of overwhelming choice – be it health care options, televisions, or investment products – can and often does result in behavioral biases, stress, and poor decisions. In this article, we share insights from The Paradox of Choice and discuss the implications for investors.

Value vs. Glamour: The Challenge of Expectations (February 2008) In “Value vs. Glamour: The Challenge of Expectations,” the Brandes Institute examines the historical performance of individual glamour and value stocks. We believe this performance data demonstrates why investors should be cognizant of the relationship between stock price and value. The specific stock references remind investors that companies with soaring growth rates and wide popularity may not always make great investments.

Liability-Driven Investing and Equity Duration (January 2008)Increasing interest in liability-driven investing (LDI) in the pension community has prompted many plan sponsors to seek longer-duration investments. Historically, empirical evidence has guided plan structures toward long-duration bonds as an appropriate liability-matching instrument, citing relatively short durations for U.S. equities. However, LDI depends upon accurately measuring duration for assets – including equities. In this article, the Brandes Institute reexamines assumptions used to calculate equity duration and poses key questions for investors to consider when pursuing LDI.

Fixed Income Falling Knives Phase Two: Examining the Relationship Between Issuer-Specific Bond and Equity Returns (October 2007) Previous research by the Brandes Institute documented the opportunities available by investing in falling knives (securities whose prices have fallen sharply). Now, in new research on this topic, we investigated the relationship between bond and equity prices in this context. Specifically, we looked for evidence of whether a company’s stock price before a fixed income falling knife event gave any indication of its subsequent bond prices, or vice versa.

A Survey of Corporate Governance Literature Since 1989 (September 2007) This paper, jointly authored by Professor David Finegold of the Keck Graduate Institute, Professor George Benson of The University of Texas at Arlington, and David Hecht of the Brandes Institute, provides a comprehensive review of academic literature on corporate governance relating board structure and practices to firm financial and stock market performance. We believe this to be the first comprehensive review of research on boards and performance since Zahra and Pearce published “Boards of Directors and Corporate Financial Performance: A Review and Integrative Model” more than 15 years ago. In addition to reviewing more than 90 articles, the research also addresses how the findings may apply to the major governance reforms introduced by the United States Congress and the New York Stock Exchange (NYSE) and Nasdaq in the last few years. This paper was published in the academic journal Corporate Governance: An International Review in September 2007. The definitive version is available at www.blackwell-synergy.com.

Death, Taxes, and Short-Term Underperformance: Fixed Income Mutual Funds (September 2007) In our initial Death, Taxes, and Short-Term Underperformance equity studies, we established that short-term underperformance may be unavoidable, even when investing in top-performing equity funds. In this article, we find strikingly similar results among fixed income funds. Given bond investors’ loss-averse predisposition, weathering stretches of short-term underperformance may have proved challenging, even when investing in fixed income funds that delivered favorable long-term performance. (Note: This article has been filed with FINRA)

Value vs. Glamour: A Study of the Indices (September 2007) As described in our “Value vs. Glamour” studies, value stocks have outperformed growth stocks over the long term. But what about commonly used benchmarks? Over the long term, aren’t returns for growth and value indices about the same?

Stumbling on Value Investing (August 2007) One of the Brandes Institute’s goals is to expand the investment community’s understanding of market behavior. As such, we are interested in aspects of behavioral finance. Using excerpts and examples from Daniel Gilbert’s book, Stumbling on Happiness (New York: Knopf, 2006), this article seeks to illustrate psychological pitfalls that may prevent long-term success for investors. It also includes seven tips designed to limit the influence of potential behavioral shortcomings and help investors make more informed decisions.

Global Small Cap Stocks: Reexamined and Redefined (July 2007) The small-cap premium has not been apparent consistently in developed markets outside North America since 1989. Why? In this comprehensive study, the Brandes Institute investigates existing methodologies for defining the global small-cap universe and their relationship to performance. We also introduce regional and country universes designed to analyze constituent-level fundamentals and their influence on historical performance differences. Our research reveals that North American small caps have shown differentiating fundamental traits vs. their non-North American small-cap peers. But these differences in fundamentals may not fully explain the performance disparity. Perhaps the origins of a company and its point on its “lifecycle” are different across regions. The Brandes Institute intends to examine the performance characteristics of lifecycle groupings among small caps across regions and sectors.

Death, Taxes, and Short-Term Underperformance: Non-U.S. Funds (July 2007) Death, Taxes, and Short-Term Underperformance (February 2007) Now updated through 2006, these articles illustrate the potential for periods of short-term underperformance may be one of the few certainties that investors can count on. Our research focuses on the performance results of U.S. and non-U.S. mutual funds over the last decade. Observations suggest that underperformance in shorter time periods – such as one quarter, one year, or even three years – is to be expected, even for funds that have performed strongly over the long term. (Note: These articles have been filed with FINRA.)

Currency Hedging Programs: A Long-Term Perspective (April 2007) This article addresses currency performance over extended periods of time, and examines the potential implications for investors considering implementation of a currency hedging program. While currency movements have tended to be mean-reverting, there have been extended periods of positive as well as negative impact for investors. By reviewing historical returns, the paper highlights the behavioral considerations that may influence the effectiveness of hedging programs.

Fixed Income Falling Knives (October 2006) In 2002, the Brandes Institute first explored the Wall Street adage “never catch a falling knife,” which warns against investing in equities whose share prices have dropped sharply in a short period of time. But our study suggested that investors who avoid falling knives altogether may be foregoing significant opportunity. Do the same dynamics exist for bonds? To answer this question, we defined fixed income falling knives using widening spreads among corporate bonds, then tracked their subsequent performance. In this paper, we reveal our findings.

Balance Sheet Cash: Unlocking Value in Japan (October 2006) Are companies using cash on their balance sheets to enhance shareholder value – especially in Japan, where many firms tend to have higher cash positions than U.S. or European companies? In this study, the Brandes Institute investigates key factors that differentiate the cash-rich companies of Japan from other developed markets. Additionally, the study explores the fundamental characteristics and structural impediments that may have contributed to these firms’ cash surpluses, as well as the potential for future reforms to assist in unlocking the value within these Japanese companies.

Carrying On? (October 2006) The “carry trade” technique, which involves owning a higher interest rate currency by borrowing in a lower rate currency, has been widely employed by currency traders since the reintroduction of floating exchange rates in the early 1970s. This paper examines whether, and in what conditions, the carry trade’s profits may be overwhelmed by typically infrequent but large losses. We also discuss the behavioral factors that may shed light on this pattern.

Value vs. Glamour: Updated and Expanded (September 2006) Value vs. Glamour Non-U.S.: The Value Premium in Non-U.S. Markets (December 2006) In 1994, Josef Lakonishok, Andrei Shleifer, and Robert Vishny published a landmark study investigating the performance of value stocks relative to that of glamour securities in the United States over a 26-year period. Their research concluded that value stocks tended to outperform glamour stocks by wide margins. What effect did the popularity of glamour stocks in the late 1990s and early 2000s have on this conclusion? The Brandes Institute updates our study through June 2006, examining comparative performance over a 38-year period. We also extend the scope of the initial study to include 14 non-U.S. markets in seeking to determine if the value premium was consistent across global markets. (To request earlier versions of our value vs. glamour research, please [email protected].)

Currency Update: The Long-Term Perspective for Canadian Investors (May 2006) So far this decade, many Canadian investors’ returns from world markets have been eroded by a strong Canadian dollar. In this article, we examine whether the last few years have been particularly unusual compared to a longer-term history. We also look at issues facing Canadian investors considering hedging their non-domestic currency exposure.

Commission Recapture: Considerations and Reflections (December 2005) Some institutional investors believe commission recapture programs are a “free lunch.” Others believe the “lunch” is not free; in fact, they believe it may come at a significant cost. In this article, we seek to evaluate commission recapture programs from various perspectives, clarify and raise awareness of key issues surrounding these programs, and stimulate debate regarding their potential benefits and drawbacks.

Benjamin Graham on Fixed Income (December 2005) Drawing on books written by Benjamin Graham, we explore his thoughts on fixed income securities. Similar to his philosophy on common stocks, Graham’s approach to fixed income is based upon the margin of safety concept.

Value vs. Glamour in Non-U.S. Markets: Recent Value Outperformance, Its Drivers and Considerations (December 2005) This article addresses factors that contributed to non-U.S. value stocks’ considerable outperformance versus glamour stocks over the past five years, as well as the implications, if any, for investors.

Reviewing The Future for Investors by Bruce J. Grantier, CFA (December 2005) Brandes Institute Advisory Board member Bruce Grantier (Vice President, Pension Assets at Scotiabank) shares his perspective on Jeremy Siegel’s latest book, The Future for Investors: Why the Tried and True Triumph Over the Bold and the New.

Currencies and Hedging: The Longer-Term Perspective (November 2005) Currencies and Hedging Appendices (November 2005) Are currency markets efficient? Does hedging your international equity portfolio reduce your international diversification? Do stop-loss limits help overall hedging returns? In this study, the Institute compiled and analyzed data from the perspective of investors in 23 developed countries over the full 32-year era of floating exchange rates to seek to answer the above questions and others. The findings may challenge many assumptions about currencies and hedging.

New Insights Into the Case for Emerging Market Equities (July 2005) Emerging markets may attract equity investors who believe they will profit from superior economic growth. But is this true? In this article, we examine London Business School research that reveals no positive relationship between a country’s GDP growth rate and its stock market returns.

Perceptions and Practice in Manager Selection (March 2005) On the topic of selecting investment managers, we investigate two related questions: (1) does a steady, second-quartile performance ranking every quarter result in first-quartile status over time, and (2) how often do “good” managers experience “bad” stretches of performance? The findings suggest that, theoretically, a steady, second-quartile manager would migrate into the first quartile over time – with an important exception. Also, the tough stretches of performance for “good” managers may create opportunities to exercise “contrarian manager selection.”

The Group Dynamics Q-Sort (December 2004) Investors and consultants strive to identify investment managers they believe will be “superior” over time. In addition to assessing performance, practitioners may seek to evaluate a manager’s philosophical or cultural “fit.” But how do you quantify culture? How do you gather hard data on soft skills? The Brandes Institute partnered with Prof. Randall Peterson of the London Business School and Watson Wyatt Worldwide to assess business management skills among money managers using a tool, the Q-Sort, typically applied by social scientists. We believe the results shared in this research paper provide insights for interpreting firms’ cultural characteristics and a context within which more informed decisions about managers’ top management teams may be made.

Concentrated Portfolios: An Examination of Their Characteristics and Effectiveness (September 2004) Until now, concentration in portfolios has not been well defined, yet many investors seem to regard it as a positive, based on the recent pace of introductions of more focused portfolios. With this study, the Institute – working in collaboration with Global Wealth Allocation - seeks to provide a more useful definition of concentration and test whether concentration, on its own, does in fact enhance returns.

Market Efficiency and the National Football League (September 2004) What does the issue of market efficiency have in common with professional American football? An interesting subset of efficiency research has focused not on stock markets but on the markets surrounding football wagering. In this article, we take a look at some football-related findings that provide fresh insight into the market efficiency debate.

The Past, The Future, and Modern Portfolio Theory (August 2004) This article, published in the August 2004 issue of PLANSPONSOR magazine, begins with a brief review of the origins of modern portfolio theory (MPT). From there, we examine three MPT ideas that lean heavily on the past as a guide to the future, and we use real market data to put these ideas to the test. Our findings highlight areas where the relationship between the past and the future is shaky – and suggest that investors who expect the future to behave like the past could be in for a surprise.

Examining the Income Component of Long-Term Returns (July 2004) Significant capital appreciation for equities and fixed income over the last decade seems to dwarf income’s contribution. Is this an aberration from historical performance? This paper investigates income’s role as a component of total returns based on 78 years of financial asset performance. The paper includes research from an extensive U.S. real estate study recently conducted by the Brandes Institute in conjunction with Professor Elroy Dimson of the London Business School. The results call into question some common preconceptions of income’s contribution to equity and real estate returns.

A Perspective on Long-Term Real Estate Returns United States (April 2004) How have capital appreciation and income contributed to real estate returns over the last 77 years? In a collaborative study sponsored by the Brandes Institute and in conjunction with Professor Elroy Dimson of the London Business School, we investigate long-term real estate returns in the United States. The study provides data to 1926 on a national (as opposed to regional) basis, and by breaking out components of total return.

Behavioral Finance – Pitfalls & Prevention for Plan Sponsors (February 2004)Behavioral Finance – Pitfalls & Prevention for Plan Sponsors II (March 2004) Robert Maynard, Chief Investment Officer at the Public Employee Retirement System of Idaho, raises awareness of behavioral issues and their relation to common investment problems with the goal of enhancing decision-making, particularly for institutional investors.

Falling Knives Around the World (August 2004) Our research into Wall Street’s adage “never catch a falling knife” showed that when many investors saw risk among companies whose share prices had dropped sharply, there also was opportunity. Historically, the majority of falling knives in our studies were created during a few periods of market turmoil. Given the declines in global markets in 2008, we are focusing current research on various traits of the recently created group of knives and comparing them (and subsequent returns) with knives generated in prior, turbulent periods.

Changes in the Characteristics of International Diversification (October 2003) What are the potential diversification benefits from equity holdings outside the United States? Our findings – prepared in collaboration with Ashdon Investment Analysis & Research, LLC – suggest that diversification benefits have sector aspects as well as country ones, and that U.S. investors should pay attention to size and multinational characteristics, as well.

Proxy Voting: Making Sure the Vote Counts (October 2003) When attempting to exercise their primary avenue for activism – proxy voting – shareholders around the world must overcome a variety of legal, regulatory, and procedural obstacles that may prevent them from getting their votes counted – and counted correctly.

“Managing Pension Fund Assets as if the Long Term Really Did Matter” (October 2003) Leading financial organizations, including the United Kingdom’s Universities Superannuation Scheme Limited (USS), sponsored a contest with this provocative title seeking proposals for a more effective approach to the issues facing long-term investors.

Taking Time Out (October 2003) Most investors consider share price movement to be the critical factor in their decision to buy, hold, or sell any security. Here, we challenge that perception by taking time “out of the equation” and focusing on business value instead of share price.

A Monograph on Prehistoric Survival Patterns… (October 2003)The “Misinformation” Ratio (September 2002) Published in the September 30, 2002 issue of Pensions & Investments magazine, this article discusses variations in common methods of calculating information ratios and Sharpe ratios – and shows how these variations can sometimes lead to confusing results.

Creating Value Through Activism (August 2002) From the perspective of an institutional money manager, we explore risks and opportunities for activism, including why it remains an infrequent option, whether it should be encouraged, and its potential and limitations in contributing to long-term shareholder wealth.

---

Yet more studies and research papers on value investing

• Doukas, J. - Click here to view published papers
• de Zwart, G., and D. van Dijk, 2008, “The Inefficient Use of Macroeconomic Information in Analysts’ Earnings Forecasts in Emerging Markets”, ERIM Report Series Reference No. ERS-2008-007, March 2008.
• de Zwart, G., J. van der Hart, and D. van Dijk, 2005, “The Success of Stock Selection Strategies in Emerging Markets: Is it Risk or Behavioral Bias?”, Emerging Markets Review, Vol. 6, No. 3, September, pp. 238-262.
• Conover, M. C., W. S. Bauman, and R. E. Miller, “Growth versus Value and Large-Cap versus Small-Cap Stocks in International Markets”, Financial Analysts Journal,Vol.52, No. 2, March-April, 1998, pp. 75-89.
• Conover, M. C., W. S. Bauman, and R. E. Miller, 2001, “The Performance of Growth Stocks and Value Stocks in the Pacific Basin”, Review of Pacific Basin Financial Markets and Policies, Vol. 4, No. 2, June, pp. 95-108…available soon.
• Conover, M. C., W. S. Bauman, and D. R. Cox, 2002, “Are the Best Small Companies the Best Investments?”, Journal of Financial Research, Summer, 25:2…available soon.
• Conover, M. C., J. C. Banko, and G. R. Jensen, 2006, “The Relationship between the Value Effect and Industry Affiliation”, Journal of Business, forthcoming, September, vol. 79, no. 5.
• Bauman, W. S., and R. J. Dowen, 1984, “A Test of the Relative Importance of Popularity and Price-Earnings Ratio in Determing Abnormal Returns”, Journal of The Midwest Finance Association, Vol. 13, pp. 34-47.
• Bauman, W. S. and R. J. Dowen, 1986, “The Relative Importance of Size, P/E, Neglect”, The Journal of Portfolio Management, Vol. 12, No. 3, Spring, pp. 30-34.
• Bauman, W. S., and R. J. Dowen, 1986, “A Fundamental Multi-Factor Asset Pricing Model”Financial Analysts Journal, Vol. 42, No. 4, July/August, pp. 45-51.
• Bauman, W. S., and R. J. Dowen, 1994, “Security Analyst Forecasts and the Earnings Yield Anomaly”, Journal of Business Finance and Accounting, Vol. 21, No. 2, March, pp. 283-291.
• Bauman, W. S., and R. E. Miller, 1997, “Investor Expectations and the Performance of Value Stocks Versus Growth Stocks”, The Journal of Portfolio Management, Vol. 23, No. 3, Spring, pp. 57-68.
• Bauman, W. S., C. M. Conover, and R. E. Miller, 1999, “Investor Overreaction in International Stock Markets”, The Journal of Portfolio Management, Vol. 25, No. 4, Summer, pp. 102-110.
• Arnott, R., J. Hsu, and P. Moore, 2005, “Fundamental Indexation”, Financial Analysts Journal, 61(2), (March/April), pp. 83-99.
• Alles, L., and G. Athanassakos, 2006, “The Effect of Investment Horizons on Risk, Return and End of Period Wealth for Major Asset Classes in Canada”, Canadian Journal of Administrative Sciences, June, Vol. 23, No. 2, pp. 138-152.
• Ackert, L.F., and G. Athanassakos, 1997, “Prior Uncertainty, Analyst Bias, and Subsequent Abnormal Returns”, Journal of Financial Research, Summer, 20(2): 263 – 273.
• Ackert, L.F., and G.Athanassakos, 2000, “Institutional Investors, Analyst Following, and the January Anomaly”, Journal of Business Finance and Accounting, May, 27(3&4): 469 – 485.
• Ackert, L.F., and G. Athanassakos, 2001, “Visibility, Institutional Preferences and Agency Considerations”, Journal of Psychology and Financial Markets, 2(4): 201 – 209.
• Athanassakos, 2003, “A Simultaneous Equations Analysis of Analysts’ Forecast Bias, Analyst Following, and Institutional Ownership”, Journal of Business Finance and Accounting, September, 30(7-8): 1017 – 1042.
• Athanassakos, G., 1992, “Portfolio rebalancing and the January effect in Canada”,Financial Analysts Journal, November/December, 48(6): 67 – 78. Ackert, L.F., and G.
• Athanassakos, G., and J. A. Schnabel, 1994, “Professional Portfolio Managers and the January Effect: Theory and Evidence”, Review of Financial Economics, Fall, 4(1): 79 – 91.
• Athanassakos, G., and L. F. Ackert, 1998, “The Seasonal Impact of Institutional Investors [The January Effect]”, Canadian Investment Review, Fall, 11(3): 28 – 31.
• Athanassakos, G., 2002, “The Scrutinized-firm Effect, Portfolio Rebalancing, Stock Return Seasonality, and the Pervasiveness of the January Effect in Canada”,Multinational Finance Journal, 6(1): 1 – 27.
• Athanassakos, G., 2007, “Valuing Internet Ventures”, Journal of Business Valuation and Economic Loss Analysis, 2(1), Article 2.
• Athanassakos, G., 2008, “Seasonal Patterns in Canadian Financial Markets and the Impact of Professional Portfolio Rebalancing: Evidence of Profitable Opportunities”,Journal of Financial and Economic Practice, Vol. 9, No. 1, Fall, pp.73-96.
• Athanassakos, G., 2009, “Value vs. Growth Stock Returns and the Value Premium: The Canadian Experience 1985-2005”, Canadian Journal of Administrative Sciences, Vol. 26, No. 2, March, pp. 109-121.
• Athanassakos, G., 2010, “Seasonality in Value vs. Growth Stock Returns and the Value Premium”, Journal of Financial and Economic Practice, Vol. 10, No. 2, pp. 73-96.
• Athanassakos, G., 2011, “The Performance, Pervasiveness and Determinants of Value Premium in Different US Exchanges: 1985-2006”, Journal of Investment Management, Forthcoming
• Athanassakos, G., 2011, “Do Value Investors Add Value?”, Journal of Investing, Forthcoming.
• Athanassakos, G., 2011, “The Performance, Pervasiveness and Determinants of Value Premium in Different US Exchanges: 1985-2006”, Journal of Investment Management, Vol. 9, No. 3, Third Quarter, pp. 33-73.
• Athanassakos, G., 2012, “Value Investing Vs. Modern Portfolio Theory”, (Editorial)Journal of Business & Financial Affairs, Vol. 1, No. 2, pp. 1-2.
• Athanassakos, G., 2013, “Separating Winners from Losers Among Value and Growth Stocks in Canada: Another Step in the Value Investing Process“, Journal of Applied Research in Accounting and Finance (JARAF), Vol. 8, No. 1, (June), pp. 17-40.
• Athanassakos, G., 2013, “Are Negative P/E and P/B ratio Firms Different?”, Journal of Business & Financial Affairs, Vol. 2, No. 1, pp. 1-4.
• Fama, E. - Click here to view published papers
• French, K., and E. F. Fama, 2007,“Disagreement, Tastes, and Asset Pricing”, Journal of Financial Economics,Vol. 83, pp. 667-689.
• French, K., and E. F. Fama, 2006, “The Value Premium and the CAPM”, Journal of Finance, Vol. 61, pp. 2137-2162.
• French, K., and E. F. Fama, 1998, “Value versus Growth: The International Evidence”, Journal of Finance, Vol 53, No 6, December 1998.
• French, K., and E. F. Fama, 1995, “Size and Book-to-Market Factors in Earnings and Returns”, Journal of Finance, Vol 50, No 1, March 1995.
• French, K., and E. F. Fama, 1993, “Common Risk Factors in the Returns on Stocks and Bonds”, Journal of Financial Economics, Vol. 34, Issue 1, pp. 3-56.
• French, K., and E. F. Fama, 1992, “The Cross-Section of Expected Stock Returns”,Journal of Finance, Vol. 47, Issue 2, pp. 427-65.
• Griffin, J., and M. Lemmon, “Does Book-to-Market Equity Proxy for Distress Risk?”, 2002, Journal of Finance Vol. 57, pp. 2317-2336.
• Griffin, J., 2002, “Are the Fama and French Factors Global or Country-Specific?” Review of Financial Studies 15, 783-803.
• Guo, H. - Click here to view published papers Hirshleifer, D., and K. Daniel, Subrahmanyam, A., 1998, “Investor Psychology and Security Market Under- and Over- Reactions”, Journal of Finance, lead article, December, pp. 1839-85.
• Hirshleifer, D., and K. Daniel, Subrahmanyam, A., 2001, “Overconfidence, Arbitrage, and Equilibrium Asset Pricing”, Journal of Finance, 56(3), June, 73-84.
• Hirshleifer, D., 2001, “Investor Psychology and Asset Pricing” Journal of Finance, 56(4), August,1533-1598.
• Hirshleifer, D., and S. H. Teoh, 2003, “Limited Attention, Information Disclosure, and Financial Reporting”, Journal of Accounting and Economics, 36(1-3), December, 337-386.
• Hirshleifer, D., K. Hou, S. H. Teoh, and Y. Zhang, “Do Investors Overvalue Firms with Bloated Balance Sheets?”, Journal of Accounting and Economics, 38(1-3), December, 2004, pp. 297-331.
• Ho, K. – Click here to view published papers
• Houge,T. – Click here to view published papers
• Z., C. Sialm, S. Weisbenner 2008, “Portfolio Concentration and the Performance of Individual Investors”, Journal of Financial and Quantitative Analysis, Vol. 43, pp. 613-655.
• Kacperczyk, M., C. Sialm, and L. Zheng, 2005, “On the Industry Concentration of Actively Managed Equity Mutual Funds”, Journal of Finance, Vol. 60, pp. 1983-2012.
• Knewtson, H. S., R. W. Sias, and D. A. Whidbee., 2010, “Style Timing with Insiders”,Financial Analysts Journal, July/August 2010, Vol. 66, No. 4.
• Pantzalis, C. – Click here to view published papers
• La Porta, R., 2002, “Expectations and the Cross-Section of Stock Returns”, Journal of Finance, December 1996. Reprinted in Harold M. Shefrin ed. Behavioral Finance, Blackwell Publishers Ltd., Northampton, Massachusetts.
• La Porta, R., J. Lakonishok, A. Shleifer, and R. Vishny, 1997, “Good News for Value Stocks: Further Evidence on Market Efficiency”, Journal of Finance, Vol. 52, No. 2 (Jun., 1997), pp. 859-874.
• Li, F., R. Arnott, and K. Sherrerd, 2009, “Clairvoyant Value and the Value Effect”, The Journal of Portfolio Management, 35(3), Spring 2009, pp. 12-26.
• Phalippou, L. -Click here to view published papers
• Piotroski , J. D., 2000, “Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers”, Journal of Accounting Research, Vol. 38, Supplement: Studies on Accounting Information and the Economics of the Firm, pp. 1-41
• Richardson, S. – Click here to view published papers
• Schill, M., M. Cooper and H. Gulen, 2010, “The asset growth effect in stock returns”,Journal of Investment Management, Vol. 8, No. 3, pp., 65-79.
• Shleifer, A. - Click here to view published papers
• Subrahmanyam, A., 2007, - “Behavioural Finance: A Review and Synthesis”,European Financial Management, 14(1), pp. 12–29.
• Viceira, L. - Click here to view published papers
• Yang, J., H. Guo, R. Savickas, and Z. Wang, 2005, “Is Value Premium a Proxy for Time-Varying Investment Opportunities: Some Time Series Evidence”, Journal of Financial and Quantitative Analysis,
• Forthcoming. Zhang, L., and R. Pertkova, 2005, “Is Value Riskier Than Growth?”, Journal of Financial Economics 78 (1), pp. 187-202.
• Zhang, L., 2005, “The Value Premium”, Journal of Finance 60 (1), 67-103.
• Zhang, L., J. F. Gomes, and L. Kogan, 2003, “Equilibrium Cross-Section of Returns”August 2003, 111 (4), Journal of Political Economy 693-732.
• Walkshäusl, C., 2009, “Fundamental Indexing Around the World”
• Wong, W-K., 2009, “Financial Astrology: Mapping the Presidential Election Cycle in US Stock Markets”,
• January. Yan, Z., 2009, “When Two Anomalies Meet: Post-Earnings-Announcement Drift and Value-Glamour Anomaly”,
• September. Yang, J., and X. Su, 2006, “Are Value and Growth More Predictable than the Market?”,
• March. Zhang, L., L. Chen, and R. Petkova, 2006, “The Expected Value Premium”, presented at AFA, last updated in September 2006 [revision of NBER working paper #12183, Ross School of Business working paper #1049],
• September. Zhang, L., and N. Liu, 2006, “Is the Value Spread a Useful Predictor of Returns?”, presented at WFA, last updated in September 2006 [revision of NBER working paper #11326,
• Ross School of Business working paper #1051], September. Zhang, L., H. Gulen, and Y. Xing, 2004, “Value versus Growth: Movements in Economic Fundamentals”, presented at AFA, August. Zhang, L. -
• Click here for more information on Lu Zhang’s research Fong,
• W. M., 2008, “Investigating the Risk Argument for the Value Premium”, December.
• French, K., and E. F. Fama, 2007, “Average Returns, B/M, and Share Issues”, April.
• French, K., and E. F. Fama, 2007, “Migration”, February.
• French, K., and E. F. Fama, 2005, “The Anatomy of Value and Growth Stock Returns”, September.
• French, K., and E. F. Fama, 2006, “Dissecting Anomalies”, December.
• Gray, W., and A. Kern, 2010, “Do Fund Managers Identify and Share Profitable Ideas?”.
• Gray, W., and A. Kern, 2008, “Fundamental Value Investors: Characteristics and Performance”, December.
• Hirshleifer, D., and S. H. Teoh, 2005, “Limited Investor Attention and Stock Market Misreactions to Accounting Information”, November.
• Hirshleifer, D., S. H. Teoh, and K. Hou, 2005, “Accruals and Aggregate Stock Market Returns”, November.
• Hirshleifer, D., S. H. Teoh, and K. Hou, 2006, “Accruals and NOA Anomalies: Risk or Mispricing?”, March.
• Hirshleifer, D., S. H. Teoh, and S. S. Lim, 2006, “Driven to Distraction: Extraneous Events and Underreaction to Earnings News”, May.
• Arnold, G., 2007, “Return Reversal in UK Shares”, January.
• Arnold, G., 2007, “Financial Statement Analysis and Return Reversal”.
• Arnold, G., 2007, “Testing Benjamin Graham’s Net Current Asset Value Strategy in London”, January.
• Bhattacharya, U., and N. E. Galpin, 2005, “Is Stock Picking Declining Around the World?”, November.
• Billett, M., Z. Jiang, and L. Rego, 2010, “Does Customer Sentiment Contribute to Investor Sentiment: Glamour Brands and Glamour Stocks?”, May.
• Blazenko, G., 2009, “Value Versus Growth in Dynamic Equity Investing”, December.
• Boyle, P., L. Garlappi, R. Uppal, and T. Wang, 2009, “Keynes Meets Markowitz: The Tradeoff between Familiarity and Diversification”, February.
• Cohen, R., C. Polk, and B. Silli, 2010, “Best Ideas” May.
• Investing for Higher After-Tax Returns: Lessons for Tax-Paying Investors from Warren Buffett, Index Funds, the Best-Performing Stocks over an 18-year Period, and Our Own Experience by Tweedy Browne
• What Do Financial Economists Have to Say About “Value”? via Columbia University. In about 2 pages this article DESTROYS the efficient market theory.
• Valuation Ratios and the Long-Run Stock Market Outlook: by Robert J. Shiller
• Buffett’s Alpha by Andrea Frazzini, David Kabiller, and Lasse H. Pedersen of Yale University
• PDF download (124 KB). A must read 50 page free book that shows how value outperforms internationally and over almost every time period. Dubinsky, Andrew. “Value Investing Retrospective” Heilbrunn Center for Graham and Dodd Investing Research Project (2006).
• PDF download (1326 KB) Fama, Eugene and Kenneth R. French. “Value versus growth: The international evidence” Journal of Finance 53 (1998): 1975–1999.
• PDF download (124 KB) Lakonishok, J., A. Shleifer and R. Vishny. “Contrarian investment, extrapolation and risk” Journal of Finance 49 (1994): 1541–1578.
• PDF download (1176 KB) La Porta, R., J. Lakonishok, A. Shleifer and R. Vishny. “Good news for value stocks:
• Further evidence on market efficiency” Journal of Finance52 (1997): 859–874. PDF download (509 KB)
• Net-Net Number: Implications & Conclusions Equity Risk Premiums (ERP)
• Determinants, Estimation and Implications – The 2010 Edition Equity Risk Premiums (ERP)
• Determinants, Estimation and Implications – The 2011 Edition Equity Risk Premiums (ERP)
• Determinants, Estimation and Implications – The 2012 Edition Equity Risk Premiums (ERP)
• Determinants, Estimation and Implications – The 2013 Edition Equity Risk Premiums (ERP)
• Determinants, Estimation and ImplicationsValuation Approaches and Metrics
• A Survey of the Theory and Evidence Value Creation and Enhancement
• Back to the Future The Dishonesty of Honest People
• A Theory of Self-Concept Maintenance
• Does the Stock Market Fully Value Intangibles?
• Employee Satisfaction and Equity Prices Which is More Value-Relevant
• Earnings or Cash Flows? Creating Value through Corporate Restructuring
• Case Studies in Bankruptcies, Buyouts, and Breakups Is Portfolio Theory Harming Your Portfolio?
• Discussion of Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers

---

Selected PDFs

• The “Buy-Side” Defined (PDF)
• Interview Questions (PDF)
• Blue Ridge Capital Reading List (PDF)
• Barton Biggs reading list list (PDF)
• Bloomberg cheat sheet (PDF)
• Harlan Simon-Clinton Group (PPT)
• John Maynard Keynes letters
• Hedge Fund industry research paper (PDF)
• Hedge fund industry (PPT),
• Glocap presentation “Hedge Me” hedge fund career guide (PDF)
• Implications of the Growth of Hedge Funds (PDF)
• SEC staff report What is a hedge fund? (PDF)
• Hedge Funds: What do we know? (PDF), Journal of Applied Corporate Finance

---

Aswath Damodaran: Class notes

MBA & Executive Classes Starting in the fall of 2001, Aswath Damodaran's corporate finance and equity classes have been web cast. You can track the current semester’s classes and use the presentations that go with the class. If the current semester is ongoing, the previous semester’s classes are also archived. If you are trying to take this class online, you will probably have better luck accessing the archived semester’s classes (rather than the current one).

Spring 2013

• Corporate Finance (ongoing)
• Valuation (ongoing)

Fall 2012

• Valuation: Fall 2012

Spring 2012 (archived)

• Corporate Finance – Spring 2012
• Valuation – Spring 2012
  

Fall 2011 (archived)

• Valuation – Fall 2011

Spring 2011 (archived)

• Corporate Finance – Spring 2011

Fall 2007 (archived)

Financial Management (Corporate Finance for undergraduates) (Links were finally removed, but watch the sessions for the Corporate Finance class instead. It is the same class)

The webcasts of a shorter executive ( two-day) MBA valuation seminar and a three-day corporate finance seminar can also be downloaded. The formet covered primarily DCF valuation and is available in 4 3-hour sessions and the latter is a condensed version of my regular corporate finance class and is composed of six 3-hour sessions.

• Executive Valuation seminars – June 2012
• Executive Corporate Finance class – January 2011

---

Aswath Damodaran: Valuation research papers

Paper Listing (Click on the paper to see a short abstract. You can download the paper as a pdf file)

Estimation Issues in DCF valuation

1. Estimating Riskfree Rates
2. The Equity Risk Premium (2008 version, 2009 version, 2010 version, 2011 Edition, 2012 Edition,2013 Edition)
3. Estimating Risk Parameters
4. Estimating Company Risk Exposure to Country Risk
5. Dealing with Operating Leases
6. Dealing with R&D
7. 25 Questions on DCF Valuation
8. Measuring Returns: ROE, ROC and ROIC
9. Leases, Debt and Value
10. Valuing Equity Claims: Voting and Liquidity Differences, Cash Flow Preferences and Financing Rights

Valuation: Special situations

1. Valuing Distressed Firms
2. Valuing Financial Service Firms (2002 version)
3. Valuing Private Businesses
4. Valuing Acquisitions

Valuation: Different sectors (Crisis version: 2009)

1. Valuing commodity and cyclical companies
2. Valuing financial service firms (2009 version)
3. Valuing companies with intangible assets
4. Valuing emerging market companies
5. Valuing multi-business, multinational enterprises

Loose ends in valuation

1. The Value of Transparency
2. The Value of Control
3. Marketability and Value
4. The Illiquidity discount
5. The Value of Cash and Cross Holdings
6. Employee Stock Options, Restricted Stock and Value
7. The Value of Synergy
8. The Value of Intangibles
9. The Cost of Distress
10. Value Enhancement: Back to Basics

Corporate finance

1. Beyond Dividends: Stock Buybacks, Spin Offs and Tracking Stock
2. Dividends and Taxes: The Effect of the 2003 Tax Changes on Equity Values
3. Value and Risk: The Payoff to Risk Management
4. Financing Innovations

Relative valuation and real options

1. Relative Valuation: First Principles
2. Real Option Applications in Corporate Finance and Valuation

A closer look at risk

1. Simulations, Decision Trees and Scenario Analysis: Probabilistic Approaches to Risk
2. Value at Risk (VaR): A big picture perspective
3. To Hedge or Not to Hedge? That is the question
4. Exploiting Risk: A Strategic View of Risk Management

General papers

1. A Survey Paper on Valuation Theory and Techniques

Valuation across the life cycle

1. The Dark Side of Valuation: Valuing Young Companies (Dot-com version: 2000)
2. Valuing idea businesses, start-up firms and young companies (2009 version)
3. Valuing Companies in decline and distress

What if?

1. Into the Abyss: What if nothing is riskfree?
2. A New Risky World Order: Unstable Risk Premiums and implications for practice
3. Comatose Markets: What if liquidity is not the norm?