Product Description

A strategy to profit when markets are range bound–which is half of the time

One of the most significant challenges facing today’s active investor is how to make money during the times when markets are going nowhere. Bookshelves are groaning under the weight of titles written on investment strategy in bull markets, but there is little guidance on how to invest in range bound markets. In this book, author and respected investment portfolio manager Vitaliy Katsenelson makes a convincing case for range-bound market conditions and offers readers a practical strategy for proactive investing that improves profits. This guide provides investors with the know-how to modify the traditional, fundamentally driven strategies that they have become so accustomed to using in bull markets, so that they can work in range bound markets. It offers new approaches to margin of safety and presents terrific insights into buy and sell disciplines, international investing, "Quality, Valuation, and Growth" framework, and much more.

Vitaliy Katsenelson, CFA (Denver, CO) has been involved with the investment industry since 1994. He is a portfolio manager with Investment Management Associates where he co-manages institutional and personal assets utilizing fundamental analysis. Katsenelson is a member of the CFA Institute, has served on the board of CFA Society of Colorado, and is also on the board of Retirement Investment Institute. Vitaliy is an adjunct faculty member at the University of Colorado at Denver - Graduate School of Business. He is also a regular contributor to the Financial Times, The Motley Fool, and Minyanville.com.

Product Details

• Amazon Sales Rank: #30929 in Books
• Published on: 2007-09-28
• Number of items: 1
• Binding: Hardcover
• 304 pages

Review
Katsenelson's is straightforward enough to keep a rookie investor engaged, and in-depth enough to retain the interest of old pros, which makes this a great book for those of all skill levels. He does a comprehensive job of reviewing the market's past, projecting its potential future, and developing a case for why value investing will shine as the market stagnates. He combines historical and financial analysis, along with engaging stories from his experience as a professional investment manager.--Chuck Saletta, Motley Fool

This book should be considered a practical compendium of modern finance, leaving no stones unturned on your way to better investments. Katsenelson’s passionate, witty and accessible writing expertly takes the reader through his original framework for valuing stocks in range-bound markets. A student of history and an overzealous stock picker, the author entertainingly illustrates every concept with a collection of real-world examples, demonstrating an impressive breadth and depth of understanding of what makes stocks move!--J.P. Tremblay, CFA

"How to adapt value investing for "range-bound" markets." (Financial Times, Tues 26th February 2008)

"The new Benjamin Graham is Vitaliy N. Katsenelson. I highly recommend Katsenelson's book, Active Value Investing: Making Money in Range-Bound Markets (Wiley, 2007). I like to think the old Ben Graham would have recommended it, too."--Forbes

From the Inside Flap

For the next dozen years or so, the U.S. stock market will be a wild roller-coaster ride—setting all-time highs and multi-year lows in the process. While the twists and turns of this ride are still to be written by history, the long-term, sideways "range-bound" trajectory has already been set by the eighteen-year bull market that ended in 2000. When the dust settles, only those who adapted their investment strategies to this range-bound market will have captured any meaningful profits.

Nobody understands this situation better than author, educator, and respected investment manager Vitaliy Katsenelson. And now, with Active Value Investing, he'll reveal how to achieve unparalleled success in these conditions by taking traditionally profitable and fundamentally driven strategies—developed during the eighteen-year bull market—and modifying them for use in range-bound markets.

This is not just another value investing book. It is a practical guide that contains innovative insights and timely techniques that will improve your investment endeavors during a time when others will be paying with their returns, and with lost time, for the valuation excesses of prior bull markets.

In the first part of the book, Katsenelson examines the historical performance of U.S. markets over the past two centuries and discusses what has caused prolonged bull, bear, and range-bound markets. He then looks at the emotions that have dominated each of these markets, why there is a high probability that a range-bound market has descended on us, and what you can do to forecast how long this market will last.

Part Two of Active Value Investing addresses practical application of this concept. Here you'll become familiar with performing proper stock analysis—from identifying what constitutes a good company to determining the stock price at which these companies become worth owning—and implementing an active investing strategy during range- bound markets. You'll also be introduced to the Quality, Valuation, and Growth (QVG) framework, which lies at the core of this approach. Rounding out this section are detailed discussions of the buy/sell process as well as complete coverage of important risk and diversification issues.

Range-bound markets may be difficult to invest in, but with Active Value Investing as your guide, you'll quickly learn how to squeeze real profits out of a difficult market full of exhilarating highs and surprising lows.

From the Back Cover
Praise for Active Value Investing

"This book reads like a conversation with Vitaliy: deep, insightful, inquisitive, and civilized."
—Nassim Nicholas Taleb, author of The Black Swan

"Vitaliy Katsenelson walks you through his thought processes in constructing an active value portfolio. There is not enough discussion in value investing circles about when to sell stocks, and this book advances that subject. A good balance between theoretical discussion, real anecdotes, and commonsense observations."
—David Einhorn

"Active Value Investing clearly highlights that the stock market is not a smooth trend; rather, it has periods of surge and stall. Katsenelson explains range-bound markets and emphasizes that 'valuation matters'—the valuation paid for stocks impacts the ultimate return. Range-bound markets especially require an unconstrained process of analysis to identify undervalued securities, and Katsenelson delivers a much-needed framework to achieve superior returns."
—Ed Easterling, President, Crestmont Research, author of Unexpected Returns: Understanding Secular Stock Market Cycles

"A delightfully documented and detailed deconstruction of buy-and-hold dogma. A must-read for any open-minded, thinking investor—professional or individual."
—Donald Cassidy, President, Retirement Investing Institute, and author of It's When You Sell That Counts

"Active Value Investing offers a rare combination of focus on value of underlying companies with appreciation for the effect of market dynamics on portfolio performance. Investors who understand both have the flexibility to succeed in a variety of markets. Katsenelson has the gift of packaging expert financial insight in an entertaining and educational package."
—Aaron Brown, Executive Director in Risk Methodology at Morgan Stanley author of The Poker Face of Wall Street

"Vitaliy has crafted a valuable assimilation of the primary market metrics that will benefit the active trader and long-term investor alike."
—Todd Harrison, founder and CEO, Minyanville Publishing & Multimedia, LLC

"Active Value Investing has the hallmarks of all great investing books—easy to read, humorous at times, and, most of all, it demonstrates Vitaliy's investing process in terms accessible to the novice and expert alike. Despite its title, this is a book for bull, bear, or range-bound markets and will be highly recommended to our newsletter subscribers."
—Philip Durell, advisor, The Motley Fool Inside Value

Customer Reviews

Not bad, but not good either. Two stars
Vitaliy Katsenelson's book is written in three sections: a background section, a section on active value investing strategy, and a section on applying his active value investing strategy. It's quite a friendly read which any reader with a basic knowledge of investing terms could make sense of and learn from it. The writing style is colloqial however, and the author uses pop culture references to illustrate his points. An example of bad taste is a paragraph that attempts to use Steve Irwin's tragic death as an analogy for risk and risk management strategies.

Despite these qualms, the content of this book has shining moments. The Active Value Investing strategy, while not necessarily novel, puts together many important lessons on investing in a very simple and understandable way through his QVG (Quality, Valuation, and Growth) framework. The author uses simple metrics like "P/E" to build a framework for analysing companies. In view of the recent accounting irregularities associated with the "E" in P/E, however, this one dimentional metric may be too simplistic for anybody but the most novice investor. Still, it's a start.

The last third of the book shares with the reader a lot of the author's own thoughts on buying, holding, and selling stocks. Probably the most interesting chapter to see was a chapter on "selling" and how to develop a strong sell strategy. (Useful for traveling salespeople)

Two portions of Vitaliy's book - his active value investing strategy and his various chapters on practical application - would probably be enough for a strong entry into a sea of investing books usually heavy on promises and light on actual content. Basically, the author's idea is that markets typically have two long-term "trends" and they are not bull and bear. Instead, he believes there are bull markets (the last of which finished in 2000) and flat, range-bound markets. Between 1960 and 1980, major indexes moved up and down and up and down but over the entire twenty year period there was little or no appreciation in either the Dow Jones or the S&P 500. He believes that in 2000, we started yet another one. His chapters on range bound markets are interesting and provide some very enlightening analysis of the psychology which drives long-term trends in the markets.

All-in-all, Active Value Investing: Making Money in Range-Bound Markets is an enlightening book for anyone starting out in investing. That said, some of the writing can drag and Vitaliy's strategy may feel a bit "dumbed down" for more experienced investors. Furthermore, statistically a passive index has been found to beat active investing around 60% of the time, going back to the turn of the last century. A better book on investing would be Jeremy J Siegel's "Stocks for the Long Run".

A Great Book for Investing Enthusiasts
Vitaliy's book is written in three sections: a background on range-bound markets, his active value investing strategy, and various bits of advice on applying his active value investing strategy. It's actually quite a friendly read and is something which any reader with a basic knowledge of investing terms (i.e. P/E, simple valuation, etc.) could make sense of this book and learn from it. Vitaliy's writing style is conversational and smooth though, at times, the book reads a bit too much like a one-way conversation and Vitaliy tries a little bit too hard to make pop culture references to illustrate his points. For example, there's one dubious paragraph in which Vitaliy attempts to use Steve Irwin's tragic death as an analogy for risk and risk management strategies.

Despite any qualms I may have had about the writing or choice of anecdotes, the content of this book really shines. It elucidates many topics and investing lessons that most new investors have to learn about the hard way. Vitaliy's Active Value Investing strategy, while not necessarily novel, puts together many important lessons on investing in a very simple and understandable way through his QVG (Quality, Valuation, and Growth) framework. He discusses how to find strong companies (quality of the business and growth of its business) and hammers home the point that a good company does not necessarily mean a good stock (valuation). He even puts together a rigorous but easy to use valuation framework which he describes as his "absolute P/E model" which basically allows an investor to quickly create a target value for a company's stock based on the price to earnings multiple and some qualitative assessment of the company's business.

Beyond putting together a quick and effective investment framework for investors, he also devotes the last third of the book to sharing with the reader a lot of his own thoughts on buying, holding, and selling stocks. These valuable lessons are priceless for anyone who are just starting off in investing. Probably the most refreshing chapter to see was a chapter on "selling" and how to develop a strong sell strategy. (Admittedly something I need to work on.)

Honestly, these two portions of Vitaliy's book - his active value investing strategy and his various chapters on practical application - would probably be enough for a strong entry into a sea of investing books usually heavy on promises and light on actual content. Active Value Investing delivers even more. Vitaliy presents his case for Range-Bound Markets and presents some original research supporting this rather worrisome market phenomenon that he believes we are in the midst of. Basically, the idea is that markets typically have two long-term "trends" and they are not bull and bear. Instead, he believes there are bull markets (the last of which finished in 2000) and flat, range-bound markets. Between 1960 and 1980, major indexes moved up and down and up and down but over the entire twenty year period there was little or no appreciation in either the Dow Jones or the S&P 500. He believes that in 2000, we started yet another one. His chapters on range bound markets are interesting and provide some very enlightening analysis of the psychology which drives long-term trends in the markets.

All-in-all, Active Value Investing: Making Money in Range-Bound Markets is an enlightening book for anyone starting out in investing which provides some great lessons that you don't often find in investing books more concerned with simply teaching do's an don'ts rather than the investing thought process. That being said, some of the writing can drag and Vitaliy's strategy may feel a bit "dumbed down" for more experienced investors.

Compelling Viewpoint
Mr. Katsenelson makes a compelling argument that the next 10 to 15 years will resemble the bear market of 1967-1982, when the Dow traded at or around 1,000 for 15 straight years. Though a sideways market poses challenges to every investor, Vitaliy presents a clear and concise method to profiting in such turmoil. Investors new and experienced, will be smarter for having read this book. This is a truly unique viewpoint of a lesser documented branch of value investing.