A range of value investing styles and opportunities

John Mihaljevic is the managing editor of The Manual of Ideas, a monthly journal for value-oriented investors. The popular investing newsletter is aimed at generating investment ideas and publishes interviews with numerous fund managers whose styles cover a range across areas of investing.

Mihaljevic, in his book titled The Manual of Ideas, aggregates the key takeaways from numerous interviews with fund managers and has created a guide to value investing. The book covers a range of value investing styles and opportunities: deep value, sum-of-the-parts value, jockey stocks, following super investors, small- and micro-cap stocks, special situations, equity stubs, and international equities.

If you are an avid reader on value investing and have already read other books on the subject, there’s only a marginal value addition to your knowledge. However, if you are new to stock investing, this would be a great book to gain insights into different proven investment approaches. Each investing category discussed has several dedicated works. Therefore, those who find a particular approach interesting, can do their research further.
Unfortunately, this book does not evaluate which method works best or to identify which strategy one should use, under what circumstances, and what would be the outcome. It offers basic knowledge, but you will have to dig deeper for a better understanding of which style to actually use and when. This book is more of a general overview of several approaches to investing rather than a detailed research on any one of them.

The book offers methods for deciding whether a company passed the right screen for the wrong reason, whether the financial statements are fudged, and discusses several other factors that may miss an investor’s eye. In the chapter on deep value, the author describes Benjamin Graham’s approach to ‘cigar butt’ investing. Like cigar butts, which may have a few puffs left in them, there may be stocks that have been discarded but still have some value left. This is what Graham called ‘net net’ stocks—stocks which were trading at a discount to their net current assets.

In the chapter on good and cheap stocks, Mihaljevic describes the concepts used by Joel Greenblatt to identify a company’s quality. Under this approach, the company should not only be cheap but should be backed by a high-quality business. (This is the approach adopted by Moneylife while picking stocks.) In another chapter, the author also talks about ‘jockey’ stocks; in other words, investing in companies with great management by reviewing their capital expansion plans and trends as well as their management compensation and incentives. The book discusses how to follow investors who have done well over time and achieve success by investing in the same companies as they do.

While large companies are well covered by analysts and institutional investors, Mihaljevic has dedicated an entire chapter on finding hidden gems among smaller-sized companies. However, most experienced investors would be aware of the risks in these stocks; finding a good bargain requires deeper digging. The book also covers investing in stocks by looking for value during special situations such as spin-offs, mergers or acquisition. On this topic, among the most interesting books is the one by Joel Greenblatt titled You Too Can Be a Stock Market Genius.

Finally, choosing an investment style is a matter of one’s own special needs and interests. This book will act as a good introduction.