Investment Strategies Reading List

Event Arbitrage

 

Convertible Arbitrage: Insights and Techniques for Successful Hedging by Nick P. Calamos (Hoboken, NJ: John Wiley & Sons, 2003). Convertible bonds as an event arbitrage strategy.

 

The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success by Ari Kiev (Hoboken, NJ: John Wiley & Sons, 2009). The hedge fund SAC’s fusion of a catalyst approach to event arbitrage with performance / trading psychology.

 

Merger Arbitrage: A Fundamental Approach to Event-Driven Investing by Lionel Melka and Amit Shabi (Hoboken, NJ: John Wiley & Sons, 2014). A contemporary primer on merger arbitrage techniques.

 

Merger Arbitrage: How to Profit from Event-Driven Arbitrage (2nd edition) by Thomas Kirchner (Hoboken, NJ: John Wiley & Sons, 2015). A synthesis of global macro and event arbitrage strategies.

 

Trading Catalysts: How Events Move Markets and Create Trading Opportunities by Robert I. Webb (Upper Saddle River, NJ: FT Press, 2006). Event arbitrage strategies used amidst the early part of the 2003-08 speculative bubble.

 

World Event Trading: How to Analyze and Profit from Today’s Headlines by Andy Busch (Hoboken, NJ: John Wiley & Sons, 2007). Presents a series of frameworks that Busch uses for event arbitrage in currencies and equities markets.

 

Momentum

 

Asset Rotation: The Demise of Modern Portfolio Management and the Birth of an Investment Renaissance by Matthew P. Erickson (Hoboken, NJ: John Wiley & Sons, 2014). How exchange traded funds can be used for a momentum strategy that uses a two-asset portfolio.

 

Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk by Gary Antonacci (New York: McGraw-Hill, 2014). A momentum strategy that combines relative strength and trend-following approaches.

 

Unholy Grails: A New Road to Wealth by Nick Radge (Sydney: Radge Publishing, 2012). Radge’s experience using momentum strategies in Australian financial markets.

 

Trend-Following

 

The Complete TurtleTrader: How 23 Novice Investors Became Overnight Millionaires by Michael W. Covel (New York: HarperBusiness, 2009). The definitive account of the TurtleTraders experiment in rules-based trend-following.

 

Following the Trend: Diversified Managed Futures Trading by Andreas Clenow (Hoboken, NJ: John Wiley & Sons, 2013). How trend-following strategies have been profitable in managed futures.

 

Investing With the Trend: A Rules-Based Approach to Money Management by Gregory L. Morris (Hoboken, NJ: John Wiley & Sons, 2013). A rules-based methodology for trend-following.

 

Trend Following: Learn to Make Millions in Up or Down Markets (rev. edition) by Michael W. Covel (Upper Saddle River, NJ: FT Press, 2009). A popular primer on trend-following strategies.

 

The Trend Following Bible: How Professional Traders Compound Wealth and Manage Risk by Andrew Abraham (Hoboken, NJ: John Wiley & Sons, 2012). How commodities trading advisers use trend-following strategies.

 

Trend Following with Managed Futures: The Search for Crisis Alpha by Alex Greyserman and Kathryn Kaminski (Hoboken, NJ: John Wiley & Sons, 2014). How trend-following traders adapted to the financial market volatility of the 2007-09 global financial crisis.

 

Value

 

Accounting for Value by Stephen Penman (New York: Columbia University Press, 2010). The link between value investment, accounting, and equity valuation.

 

Active Value Investing: Making Money in Range-bound Markets by Vitaliy N. Katsenelson (Hoboken, NJ: John Wiley & Sons, 2007). An adaptation of value investing strategies to the 2003-08 speculative bubble.

 

Applied Value Investing: The Practical Applications of Benjamin Graham and Warren Buffett’s Valuation Principles to Acquisitions, Catastrophe Pricing, and Business Execution by Joseph Calandro, Jr (New York: McGraw-Hill, 2009). Value investing applied during the peak of the 2003-08 speculative bubble and the start of the 2007-09 global financial crisis.

 

The Art of Company Valuation and Financial Statement Analysis: A Value Investor’s Guide with Real-Life Case Studies by Nicolas Schmidlin (Hoboken, NJ: John Wiley & Sons, 2014). Contemporary fundamental analysis for value investors.

 

The Art of Value Investing: How the World’s Best Investors Beat the Market by John Heins and Whitney Tilson (Hoboken, NJ: John Wiley & Sons, 2013). A collection of interviews with successful fund managers who are value investors.

 

Brandes on Value: The Independent Investor by Charles Brandes (New York: McGraw-Hill, 2014). Brandes’ value investment experiences at Brandes Investment Partners LP.

 

Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations by Tobias E. Carlisle (Hoboken, NJ: John Wiley & Sons, 2014). A quantitative analysis of how activist investors use value investment strategies in the market for corporate control.

 

The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment (New York: Palgrave Macmillan, 2014). Value investment as a framework for cultivating character and personal growth.

 

Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World by Ronald D. Orol (Hoboken, NJ: John Wiley & Sons, 2008). The experiences of value-oriented hedge fund managers during the 2003-08 speculative bubble.

 

Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market by Meb Faber (The Idea Farm, 2014). A synthesis of value investing and global macro approaches.

 

The Investment Checklist: The Art of In-Depth Research by Michael Shearn (Hoboken, NJ: John Wiley & Sons, 2011). How value investors undertake fundamental research.

 

The Manual of Ideas: The Proven Framework for Finding the Best Value Investments by John Mihaljevic (Hoboken, NJ: John Wiley & Sons, 2013). Presents the value investing framework of the Value Investors Club.

 

Modern Security Analysis: Understanding Wall Street Fundamentals by Martin J. Whitman and Fernando Diz (Hoboken, NJ: John Wiley & Sons, 2013). The link between fundamental security analysis and value investing.

 

The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor by Howard Marks (New York: Columbia University Press, 2013). The value investment philosophy that Marks implements at Oaktree Capital Management.

 

The Nature of Value: How to Invest in an Adaptive Economy by Nick Gogerty (New York: Columbia University Press, 2014). Presents a value creation model used by the hedge fund Bridgewater.

 

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William N. Thorndike (Boston, MA: Harvard Business School Press, 2012). Effective capital allocation as a key value investment strategy.

 

Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors by Wesley R. Gray and Tobias E. Carlisle (Hoboken, NJ: John Wiley & Sons, 2012). A synthesis of value investing, behavioural finance, and quantitative finance.

 

Security Analysis (6th edition) by Benjamin Graham and David Dodd (New York: McGraw-Hill, 2008). The influential primer on value investing.

 

Security Analysis and Business Valuation on Wall Street: A Comprehensive Guide to Today’s Valuation Methods (2nd edition) by Jeffrey C. Hooke (Hoboken, NJ: John Wiley & Sons, 2010). How Wall Street uses fundamental security analysis to value companies.

 

Security Valuation and Risk Analysis: Assessing Value in Investment Decision Making by Kenneth S. Hackel (New York: McGraw-Hill, 2011). The link between the investment process, risk management, and fundamental security valuation.

 

The Snowball: Warren Buffet and the Business of Life by Alice Schroeder (New York: Bantam Books, 2008). The authorised biography of value investor Warren Buffett.

 

Sources of Value: A Practical Guide to the Art and Science of Valuation by Simon Woolley (Cambridge: Cambridge University Press, 2009). BP’s valuation framework for analysing the economic value of companies.

 

Strategic Value Investing: Practical Techniques of Leading Value Investors by Stephen M. Horan, Robert R. Johnson, and Thomas R. Robinson (New York: McGraw-Hill, 2014). A contemporary primer on value investing and its link to corporate strategy.

 

Valuation: The Market Approach by Seth Bernstrom (Hoboken, NJ: John Wiley & Sons, 2014). Valuing firms through comparison with stock exchange and comparator company transactions.

 

Valuation: Measuring and Managing the Value of Companies (5th edition) by Tim Killer, Marc Goedhart, and David Wessels (Hoboken, NJ: John Wiley & Sons, 2010). The McKinsey valuation model for companies.

 

Value: The Four Cornerstones of Corporate Finance by Tim Koller, Richard Dobbs, and Bill Huyett (Hoboken, NJ: John Wiley & Sons, 2011). Growth, return on invested capital, and cashflow analysis in corporate finance as the foundations for valuation of companies.

 

Value Investing: From Graham to Buffett and Beyond by Bruce C.N. Greenwald, Judd Kahn, Paul D. Sonkin, and Michael van Biema (Hoboken, NJ: John Wiley & Sons, 2004). Greenwald’s value investing framework taught at the Columbia University Graduate School of Business.

 

The Value Investors: Lessons from the World’s Top Fund Managers by Ronald W. Chan (Hoboken, NJ: John Wiley & Sons, 2012). Profiles of leading fund managers who use value investing.

 

Value Maps: Valuation Tools That Unlock Business Wealth by Warren D. Miller (Hoboken, NJ: John Wiley & Sons, 2010). How tools from strategic management, industrial organisation, organisation theory, evolutionary economics, and Austrian economics can inform contemporary valuation of companies.

 

Valueable: How To Value The Best Stocks and Buy Them for Less Than They’re Worth (2nd edition) by Roger Montgomery (My 2 Cents Worth Publishing, 2010). The investment framework and experiences of Australian value investor Roger Montgomery.

 

Why Moats Matter: The Morningstar Approach to Stock Investing by Heather Brilliant and Elizabeth Collins (Hoboken, NJ: John Wiley & Sons, 2014). Morningstar’s ‘economic moats’ framework for value creation.

15th February 2012: MITx and Disruptive Innovation in Higher Education

Ken Wark and I had a brief Twitter exchange yesterday about an Atlantic Monthly story on MITx and disruptive innovation in higher education.

 

“It’s a complete misunderstanding of the business(es) universities are in,” Wark told me. “B-school bullshit.”

 

I spent Valentine’s Day night thinking about Rakesh Khurana and Henry Mintzberg, whilst writing PhD notes on the speculative bubble in terrorism studies.

 

The changes Wark notes have unfolded in Australian universities since at least the mid-1990s. As an undergraduate I saw cuts made to La Trobe University’s cinema studies department. Several of the senior academics went to Monash or University of Melbourne. I then worked in publishing, saw several companies fail, and lived through the dotcom era. As a postgraduate student, I lived through the rise and fall of the Australian Foresight Institute at Swinburne University and the first years of Monash’s counter-terrorism studies degree. As a researcher, I worked for a cooperative research centre and on a successful rebid. As a research administrator, I’ve worked on university audits and several institutional reviews. I’ve worked closely with three professors who have thought deeply about these issues over the past 8 years. What business(es) universities are in can look very different depending on whether you are a student, academic, or university administrator.

 

B-school has several lessons on navigating this debate:

 

1. Emphasise research programs and teaching that create (and extract) institutional value. Wark for example has made significant contributions to new media theory, cultural studies and to the debate on intellectual property. His distinction between people who create intellectual property (hackers) versus people who own it (vectoralists) has some implications for who controls the copyright on academic journal articles. This emphasis on value is foreign to many academics. It’s a view closer to music producers like Rick Rubin and musicians like Jay-Z and Kanye West, and to private equity and venture capital firms. However, my experience is that it’s vital to gaining tenure track, dealing with promotions committees, and handling salary contract negotiations. Successful academics can articulate their individual value and why it should be hard to imitate. Wark and I agree that there’s a ‘winner takes all’ dynamic for many academics.

 

2. Content differs from credentials. Mid-way through my Swinburne Masters studies, the professor and his teaching staff faced a student revolt. It occurred in a subject that used cohort-based learning to generate a lot of the content and insights. Several students decided they would get more value from coffee discussions with their new colleagues than paying for a five-day subject in accelerated delivery mode. When I recently wanted to understand the debate about high-frequency trading systems and market microstructure in finance, I assembled a personal reference library and spoke to industry professionals for less than the cost of a university subject. Students with Amazon Kindle software and research skills can do the same. HR managers still value credentials for specific degrees and career pathways.  Universities use credentials (and their absence) in contract negotiations. Initiatives like MITx promise to fulfill or satisfice the desire for credentials and quality content but without the current levels of student debt. It’s a value migration gambit that is potentially disruptive to tenured professors and their expertise.

 

3. Cost structure matters. Wark and I agree that higher education faces a ‘race to the bottom’ dynamic. In Australia, I see this as a competition in part between the Group of 8 institutions, a group of ‘challenger’ specialists (including Griffith, RMIT and Swinburne), and universities burdened by a high cost structure and operational inefficiencies. This impacts a range of managerial decisions from the institutional budget process to patterns of academic hiring and the quality assurance of international program delivery. The B-school curricula of GE, Jim Collins, Clayton Christensen, Michael Jensen, Aswath Damodaran, Moneyball, Stephen Schwarzman, and others has lots of relevant insights on how cost structure can be a shaping influence on institutional management. Academics who understand cost structure — even if they personally disagree with it — will have a shared framework to communicate more effectively with others.