Deep Value
The thesis of this book is that the worst quality stocks have the best expected returns, as a portfolio. Even the these low-quality stocks have a much higher probability of going bankrupt individually, they also have a much higher probability of shooting up in price. So it sounds like a classic high volatility situation where higher risk earns you higher returns. But the author’s analysis indicates that as a portfolio, the lowest quality stocks actually have lower volatility on long time scales of several years. He recommends the acquirer’s multiple as a way to filter for value stocks. The book is also full of stories about activist investors, which isn’t very practical for most investors, but makes the book more enjoyable.
Read more from the Economics and Finance category. If you would like to leave a comment, click here: Comment. or stay up to date with this post via RSS from your site.
Leave a Comment
If you would like to make a comment, please fill out the form below.