Deep Value Investing | Tobias Carlisle | Talks at Google

Talks at Google
Talks at Google
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Published 2014-12-24
"Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations" is an exploration of the philosophy of deep value investment. It describes the evolution of the various theories of intrinsic value and activist investment from Benjamin Graham to Warren Buffett to Carl Icahn and beyond. Filled with engaging anecdotes, penetrating statistical analysis and meticulous research, the book illustrates the principles and strategies of deep value investing and examines the counterintuitive idea behind its extraordinary performance.

About the Book
It is a simple, but counterintuitive idea: Under the right conditions, losing stocks—those in crisis, with apparently failing businesses, and uncertain futures—offer unusually favorable investment prospects. This is a philosophy that runs counter to the received wisdom of the market. Many investors believe that a good business and a good investment are the same thing. Many value investors, inspired by Warren Buffett’s example, believe that a good, undervalued business is the best investment.

The research offers a contradictory view. Deep Value is an investigation of the evidence, and the conditions under which those losing stocks become asymmetric opportunities, with limited downside, and enormous upside. In pursuit of this idea, it canvases the academic and industry research into theories of intrinsic value, management’s influence on that value, and the impact of attempts to unseat management on both market price and value. The value investment philosophy as first described by Benjamin Graham identified targets by their discount to liquidation value. That approach has proven extremely effective; however, those opportunities have all but disappeared from the modern stock market. To succeed, today’s deep value investors have adapted Graham’s philosophy, embracing its spirit while pushing beyond its confines. In Deep Value, I examine Graham’s 80-year-old intellectual legacy using modern statistical techniques to offer a penetrating and highly original perspective: That losing stocks offer unusually favorable investment prospects. The evidence reveals an axiomatic truth about investing: Investors aren’t rewarded for picking winners; they’re rewarded for uncovering mis-pricing.
All Comments (21)
  • @guillermocrespo8144
    This is amazing. I have seen this video a dozen of times and still find it awesome!
  • @2011blueman
    His book is one of the best investing books ever written.
  • @travismonk2804
    Such a good talk. Good questions too. 5/5 would watch again.
  • @rlam86
    Haha, i'm surprised no one mentioned the clip at 13:37 haha.... Love the camera man! :D
  • @l.s.754
    I have read Benjamin Graham's, Security analysis ( reprint of original 1934) and The Intelligent investor, books. You have added a bit more information.
  • @shenshenu1773
    Good presentation and no marketing stuffs from this guy. Well done!
  • @evanlouisemadrinan233
    Still watching this video today with the current pandemic. I hope everyone is doing fine. I can see intel with this investing strategy. Haha!
  • @giladrozban
    Very good. Should one take into account unusual gain or loss when calculating the acquire multiple? Or is it just going to give less return?
  • @leochoi1386
    The beauty of this strategy is not only its embedded systematic approach to security selection but its logic behind why it works. The logic is simple, and often times, simple is better
  • @miradvorak
    Surprisingly I was surprised. Investments in high ROIC businesses underperforms the market.
  • @ss9922
    Some nice metrics in this discussion.
  • @ericfrost4768
    What I find is the weakness of this particular strategy is its oversimplicity. It doesn´t lack logic or a track record of outperformance, however like one person in the video asked what if a sufficient number of people used this strategy would it stop working and the answer is yes (maybe it will revert, no one can know for sure). Doing my own backtesting in the Russell 3000 universe with a quarterly rebalance and using the Ebitda/EV ratio, from 01/01/2001 the top decile returned 19% annualized up until 12/24/2014 (the date the video was published). However from this date to today (01/29/2022) the top decile only returned 5% vs 13% for the benchmark. The same is true for other very simple value investing quantitative models (like Greenblatt´s magic formula, or O´Shaughnessy´s models). Maybe this great advantage that Tobias and Greenblatt mention in their books (simplicity) may end up being the very reason for the downfall of their models