Run…

…to buy the book “Quantitative Value—A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors,” by Wesley R. Gray, Ph.D., and Tobias E. Carlisle, L.L.B. (Wiley, 2013). I suspect it may be the definitive new book on value investing. You might phone your bookseller first. (I had a devil of a time getting a review copy. Wes Gray said he could not even get a copy of the book for his mother.) If you have a Kindle or other e-reader, you are probably okay, but the first printing sold out at warp speed. 

As I’ve been preaching for years and years, value investing is the method in the school of investment method acting. 

I caution the reader that my excitement stems from reading only slightly more than 30 pages of the book. But these pages are, alone, better than hundreds (maybe thousands) of pages in other investment books. In a handful of pages, the authors tackle a Graham formula that still works. Mathematically, following this path from Jan. 1, 1976, through Dec. 31, 2011, would have returned $36,354 for every $100 invested versus $4,351 for dropping $100 into the S&P 500. The authors carefully state that hardly anyone, however, would have had the gumption to stick with the approach. 

Graham Devotee-in-Chief Warren Buffett is there, too, postulating about how happy he was in the 1970s that academia adopted the efficient markets theory — in essence, removing thought from the investment process — which apparently allowed the Oracle of Omaha to do especially well by engaging his brain while others took theirs out to lunch. Philip Tetlock is discussed. He’s the fellow who taught us that experts are no better (some think worse) than the general population at predicting incomes.   

Ken Heebner’s CGM Focus Fund was the top performer from 1997 to 2007, making him a superstar stock picker, arguably the best for the decade. Heebner’s followers exited in droves in 2007-2008, and he mused that people were buying at the top and selling at the bottom as usual. I doubt that he’s much different in his investing approach now, although his fund has declined from five-star general to one-star brigadier. Heebner is in the book, as is Nassim Taleb, Charlie Munger and more. And, wow, I’m only in the beginning of the book. I think the plot and theme are aligned toward a way to tame the fire-breathing investment dragon — stay tuned for the complete review.