Deficient Markets Hypothesis
In theory:
As dead as a parrot
In his latest note, Soc Gen Analyst James Montier, compares the efficient markets hypothesis (EMH) to Monty Python’s dead parrot.
No matter how much you point out that it is dead, the believers just respond that it is simply resting!
Montier’s often pronounced EMH dead. In fact, he’s getting so frustrated he’s [...]
The How and Why of value investing
In practice:
It’s not science, and it’s not about rockets
As a youngster, the “How and Why” books inspired me and I’ve just experienced overwhelming nostalgia browsing this website. I’m not alone. Definitely not alone!
How and Why books explained things, and to a boy who’s previous main source of wisdom had been the Valiant Annual, How [...]
The simplest way to select bargain stocks
Three statistics and a newspaper
Much of the analysis on this blog is devoted to finding cheap companies with little financial risk. That’s because paying too much for companies, or buying companies that are financially insecure, is likely to affect return, adversely. Investing only in cheap, safe companies, on the other hand, boosts returns.
I favour the [...]
This week’s shares: United Drug, Sage and Europa Oil & Gas
Prospecting for oil in Reigate
Europa Oil & Gas (EOG)
We’re getting used to companies divining oil in the deepest, furthest and most inaccessible of places so it’s with a chuckle I turn to Europa and its wells or prospective wells in Lincolnshire and near Reigate (among others).
Europa’s auditor is not the first I’ve seen to sign [...]
The Long-Term PE
It’s a PE ratio, but not just any old PE ratio
Last week I boiled the way I pick shares down to three questions, the only three that count. Having spent most of the blog building up to that point I didn’t elaborate, leading Mike to comment:
It is useful to have a checklist but I think [...]
The Rediscovered Benjamin Graham
This is going to be a long review, but considering many of the words will be quotations from the mouth, or pen, of an icon, perhaps you’ll forgive me.
The Rediscovered Benjamin Graham is a collection of articles and lectures written and given by Benjamin Graham, plus a few interviews with him. It gives insight into [...]
The great value divide
The market’s reasonably priced for a change, but should investors wait until it gets ludicrously cheap?
Students of the market are tripping over themselves touting obscure measures of value, while erstwhile bears are suddenly bullish.
That’s because after decades of excessive prices the market has fallen to something like fair value. Fair, that is, relative to the [...]
Are you a speculator who thinks he’s an investor?
Apologies for this chart, a sketch from my notebook, but I’ve never seen it drawn by anyone with the patience to use a ruler, so this will have to do*1.
I imagine many of us thought we were investors in the bull market and, having, seen our profits evaporate, we’re now coming to terms with the [...]
The Subprime Solution
The boss told me I should review this book last Wednesday. On Friday, he dangled a copy over my shoulder and reiterated his suggestion. On Monday, the US Market fell further in one day than on any day since 1987 as the US Government failed to bail out banks that had overdosed on subprime mortgages.
His [...]
Sorting terminal stocks from turnarounds
How can you tell the difference between a company getting into trouble, and one getting out of it? It’s an important question for investors who try to buy shares on the cheap, when the price is low relative to the value of the company’s assets or earning power.
Typically, these companies are financially distressed. Profitability may [...]
