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Excess Returns: A Comparative Study of the World's Greatest Investors
An analysis of the investment approach of the world's top investors, showing how to achieve market-beating returns It is possible to beat the market. Taking this as a starting point, Excess Returns sets out to explore how exactly the most famous investors in the world have done it, year after year, sometimes by huge margins. Excess Returns is not a superficial survey of what investors have said about what they do. Rather, Frederik Vanhaverbeke applies a forensic analysis to hundreds of books, articles, letters and speeches made by dozens of top investors over the last century and synthesises his findings into a definitive blueprint of how exactly these investment legends have gone about their work. Among the legends whose work has been studied are Warren Buffett, Benjamin Graham, Anthony Bolton, Peter Lynch, Charles Munger, Joel Greenblatt, Seth Klarman, David Einhorn, Daniel Loeb, Lou Simpson, Prem Watsa and many more. Among the revealing insights, you will learn of the striking similarities in the craft of great investors, crucial subtleties in their methods that are ignored by many, and the unconscious errors investors commonly make and how these are counter to successful investing. Special attention is given to two often overlooked areas: effective investment philosophy and investment intelligence. The investing essentials covered include: - Finding bargain shares - Making a quantitative and qualitative business analysis - Valuation methods - Investing throughout the business cycle - Timing buy and sell decisions - And much, much more! Excess Returns is full of timeless and practical insights, presented in a unique style, to help investors focus on the most promising opportunities and lead the way to beating the market.
- GenresFinanceNonfiction
330 pages, Kindle Edition
First published June 28, 2014
30 people are currently reading
274 people want to read
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Displaying 1 - 8 of 8 reviews
January 10, 2016
This is an excellent book that starts with a set of some dozens of extraordinary top investors. The author meticulously checked out how they proceed(ed) to beat the market and looked for the similarities in their investment approach. The book is a reflection of these similarities. To get a good idea about the book and about the quality of the book there is a great and freely available book presentation on slideshare: http://www.slideshare.net/frederikvan...
The book can definitely serve as an excellent reference book for serious investors. People who are unfamiliar with the topic of value investing will find in this book one of the best overviews of how smart investors go about investing and what errors they try to avoid.
The book can definitely serve as an excellent reference book for serious investors. People who are unfamiliar with the topic of value investing will find in this book one of the best overviews of how smart investors go about investing and what errors they try to avoid.
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April 19, 2023an unknown person based on first impressions. Another example is haggling. The price range that is used during the haggling process is usually determined by the first price quoted by one of the two parties involved.
There have been plenty of successful bottom-up investors. Pioneers were Benjamin Graham and Philip Fisher. The former adhered to a bottom-up approach based almost exclusively on quantitative (i.e., financial) data. 17 Philip Fisher, on the other hand, stressed the importance of qualitative elements, such as management and a firm’s competitive position, in the evaluation of stocks. 18 Many of the great modern bottom-up investors (e.g., Warren Buffett and Joel Greenblatt) derived their investment approach from that of Graham and Fisher.
Growth At a Reasonable Price (GARP)
“People are always asking me where the outlook is good, but that’s the wrong question. The right question is: Where is the outlook most miserable?” - JOHN TEMPLETON
examples of such businesses according to Peter Lynch and John Neff are:
(i) Companies in the burial business:
(ii) Companies active in toxic waste and garbage are considered disgusting.
(iii) Companies that make things out of disgusting raw materials
many asset managers do not invest in small caps because they are difficult to trade (they are illiquid), or because their investment charters prohibit them from owning small stocks. Professional investors that manage multi-billion stock portfolios
it is safest to wait until the industry shows signs of coming back to life. This avoids the risk of investing in an industry that is in a terminal decline (e.g., radio tubes never came back).
The greatest companies are usually highgrowth, low-debt and low-cost penny-pinchers that avoid executive excesses (such as exorbitant executive salaries)
“Any time you read about a spinoff being accomplished through a rights offering, stop whatever you’re doing and take a look.” Joel Greenblatt
investing in pure local emerging market companies is full of dangers. It is often much safer to benefit from the emergence of certain countries through multinationals that have important activities in these emerging countries.
According to hedge fund market star Tom Claugus, new revenue sources that are still a few years away are often not discounted into a company’s stock price. 44 This can be explained by the fact that short-term analyst estimates don’t include this new income source
Two web services that track the holdings of some of the best investors in the US based on publicly filed documents are GuruFocus (gurufocus.com) (stockpickr.com).
Studies confirm that insider buying can indeed be a reliable indicator of future outperformance over the long run
Information about insider transactions can be found in many countries with regulatory instances (e.g., Form 144 and Form 4 with the SEC in the US), in business publications (e.g., the Wall Street Journal), or through commercial services (e.g., Bloomberg). According to Lakonishok, one of the most reliable metrics to determine the strength of insider purchases is the net purchase ratio (NPR)
Insider buying by CFOs is an even stronger indicator of future outperformance than purchases by the CEO
some of the best activist investors around, like Carl Icahn, Bill Ackman, Dan Loeb and Barry Rosenstein.
Anthony Bolton and Mohnish Pabrai like stocks with asymmetric payoffs.
comparative advantages for the country include:
(i) Programmes to increase the level of education
(ii) Focus on the export of products higher up the value chain as the development progresses. An example of a country that moved up the value chain is China. It first was a manufacturer of simple products like buttons, but gradually moved in the direction of products with higher added value like training shoes and clothes, and more recently cars and high-tech products.
Preferably, the change agent should not be an outsider but must be someone from within the ruling political class who sees the need for change. For instance, Boris Yeltsin and Gorbachev came from within the Communist Party and acknowledged that Communism had brought the Soviet Union to the brink of bankruptcy.
A mentality of saving and reinvesting instead of spending
Top investors are wary of countries where authorities change business rules at the drop of a hat, or where companies are regularly directed from above to accept unprofitable business. That’s why David Herro, for instance, avoids mainland Chinese companies (which often have to put the state interests before the interests of shareholders) and companies in Russia (where the government feels entitled to regularly change the business rules)
first, the presence of different voting classes (where foreigners can only buy the shares with the lowest voting class). Second, there may be massive salaries for management that drain profits away from shareholders and into the pockets of this management. Third, watch out for a lack of transparency and communication towards investors. Examples of companies that some top investors are wary of are family-controlled companies in Asian countries. The problems with many of these companies are that they put the interests of the family – which are not that much aligned with the interests of the other shareholders – first. They deliberately avoid transparency and they do not publish information by which investors can identify insider-dealing or conflicts of interest.
other technical factors that can play a role in the attractiveness of a stock market are the following: the liberalisation of investment conditions, the permission for pension funds to invest in stocks, and efforts from government to make information more easily available to foreign investors.
www.magicformulainvesting.com) shows the American stocks that rank highest on the P/E and ROIC criteria of Joel Greenblatt.
Value Line Survey in the US) publish lists of value stocks.
Institutional holdings of stocks can be tracked on certain websites like Vickers Stock Research ( www.vickers-stock.com)
specialised in insider transactions (e.g., Form4Oracle, www.form4oracle.com).
www.gurufocus.com) that track the transactions of top investors.
Other websites focus on special situation stocks, such as Spinoff Profiles ( www.spinoffprofiles.com) and (gemfinder.com).
Mohnish Pabrai regularly checks out the ideas presented in The Value Investors Club, Outstanding Investor Digest ( www.oid.com) and Value Investor Insight ( www.valueinvestorinsight.com). Kevin Daly reads The Value Investors Club, the Wall Street Transcript, and SumZero
There have been plenty of successful bottom-up investors. Pioneers were Benjamin Graham and Philip Fisher. The former adhered to a bottom-up approach based almost exclusively on quantitative (i.e., financial) data. 17 Philip Fisher, on the other hand, stressed the importance of qualitative elements, such as management and a firm’s competitive position, in the evaluation of stocks. 18 Many of the great modern bottom-up investors (e.g., Warren Buffett and Joel Greenblatt) derived their investment approach from that of Graham and Fisher.
Growth At a Reasonable Price (GARP)
“People are always asking me where the outlook is good, but that’s the wrong question. The right question is: Where is the outlook most miserable?” - JOHN TEMPLETON
examples of such businesses according to Peter Lynch and John Neff are:
(i) Companies in the burial business:
(ii) Companies active in toxic waste and garbage are considered disgusting.
(iii) Companies that make things out of disgusting raw materials
many asset managers do not invest in small caps because they are difficult to trade (they are illiquid), or because their investment charters prohibit them from owning small stocks. Professional investors that manage multi-billion stock portfolios
it is safest to wait until the industry shows signs of coming back to life. This avoids the risk of investing in an industry that is in a terminal decline (e.g., radio tubes never came back).
The greatest companies are usually highgrowth, low-debt and low-cost penny-pinchers that avoid executive excesses (such as exorbitant executive salaries)
“Any time you read about a spinoff being accomplished through a rights offering, stop whatever you’re doing and take a look.” Joel Greenblatt
investing in pure local emerging market companies is full of dangers. It is often much safer to benefit from the emergence of certain countries through multinationals that have important activities in these emerging countries.
According to hedge fund market star Tom Claugus, new revenue sources that are still a few years away are often not discounted into a company’s stock price. 44 This can be explained by the fact that short-term analyst estimates don’t include this new income source
Two web services that track the holdings of some of the best investors in the US based on publicly filed documents are GuruFocus (gurufocus.com) (stockpickr.com).
Studies confirm that insider buying can indeed be a reliable indicator of future outperformance over the long run
Information about insider transactions can be found in many countries with regulatory instances (e.g., Form 144 and Form 4 with the SEC in the US), in business publications (e.g., the Wall Street Journal), or through commercial services (e.g., Bloomberg). According to Lakonishok, one of the most reliable metrics to determine the strength of insider purchases is the net purchase ratio (NPR)
Insider buying by CFOs is an even stronger indicator of future outperformance than purchases by the CEO
some of the best activist investors around, like Carl Icahn, Bill Ackman, Dan Loeb and Barry Rosenstein.
Anthony Bolton and Mohnish Pabrai like stocks with asymmetric payoffs.
comparative advantages for the country include:
(i) Programmes to increase the level of education
(ii) Focus on the export of products higher up the value chain as the development progresses. An example of a country that moved up the value chain is China. It first was a manufacturer of simple products like buttons, but gradually moved in the direction of products with higher added value like training shoes and clothes, and more recently cars and high-tech products.
Preferably, the change agent should not be an outsider but must be someone from within the ruling political class who sees the need for change. For instance, Boris Yeltsin and Gorbachev came from within the Communist Party and acknowledged that Communism had brought the Soviet Union to the brink of bankruptcy.
A mentality of saving and reinvesting instead of spending
Top investors are wary of countries where authorities change business rules at the drop of a hat, or where companies are regularly directed from above to accept unprofitable business. That’s why David Herro, for instance, avoids mainland Chinese companies (which often have to put the state interests before the interests of shareholders) and companies in Russia (where the government feels entitled to regularly change the business rules)
first, the presence of different voting classes (where foreigners can only buy the shares with the lowest voting class). Second, there may be massive salaries for management that drain profits away from shareholders and into the pockets of this management. Third, watch out for a lack of transparency and communication towards investors. Examples of companies that some top investors are wary of are family-controlled companies in Asian countries. The problems with many of these companies are that they put the interests of the family – which are not that much aligned with the interests of the other shareholders – first. They deliberately avoid transparency and they do not publish information by which investors can identify insider-dealing or conflicts of interest.
other technical factors that can play a role in the attractiveness of a stock market are the following: the liberalisation of investment conditions, the permission for pension funds to invest in stocks, and efforts from government to make information more easily available to foreign investors.
www.magicformulainvesting.com) shows the American stocks that rank highest on the P/E and ROIC criteria of Joel Greenblatt.
Value Line Survey in the US) publish lists of value stocks.
Institutional holdings of stocks can be tracked on certain websites like Vickers Stock Research ( www.vickers-stock.com)
specialised in insider transactions (e.g., Form4Oracle, www.form4oracle.com).
www.gurufocus.com) that track the transactions of top investors.
Other websites focus on special situation stocks, such as Spinoff Profiles ( www.spinoffprofiles.com) and (gemfinder.com).
Mohnish Pabrai regularly checks out the ideas presented in The Value Investors Club, Outstanding Investor Digest ( www.oid.com) and Value Investor Insight ( www.valueinvestorinsight.com). Kevin Daly reads The Value Investors Club, the Wall Street Transcript, and SumZero
August 6, 2021
If you had to read only 1 book on value investing, this would be it. excellent
January 10, 2016
This is an excellent book that starts with a set of some dozens of extraordinary top investors. The author meticulously checked out how they proceed(ed) to beat the market and looked for the similarities in their investment approach. The book is a reflection of these similarities. To get a good idea about the book and about the quality of the book there is a great and freely available book presentation on slideshare: http://www.slideshare.net/frederikvan...
The book can definitely serve as an excellent reference book for serious investors. People who are unfamiliar with the topic of value investing will find in this book one of the best overviews of how smart investors go about investing and what errors they try to avoid.
The book can definitely serve as an excellent reference book for serious investors. People who are unfamiliar with the topic of value investing will find in this book one of the best overviews of how smart investors go about investing and what errors they try to avoid.
January 9, 2015
Pretty good overview of (primarily value) investing ideas. Unfortunately, it is hard to accurately assess how valid the suggestions are because they are drawn from a cherry picked sample of retrospectively "great" investors. The downside of this, of course, is that it leaves out all the investors in their cohort who followed the same principles they did, but didn't experience the same remarkable degree of success.
March 31, 2019
A good book, but too much details and too much repitition.
Want to read
February 24, 2018Recommended by Nintai Partners
Displaying 1 - 8 of 8 reviews