I very much enjoyed the first edition of Deep Value Investing, in which the author clearly described his investment process and illustrated it with 15 helpful case studies, focusing on UK small caps. The book was published in 2013 and my initial review can be found here.
The newly published second editionis much more than a refresher; it has 6 additional case studies and walks us through what happened to the old ones in the past 5 years. The case studies are still organised in 3 groups: deep value successes, deep value failures, and deep value shares of tomorrow (Enteq Upstream, Hargreaves Services, Lamprell, Hydrogen Group, Record). The latter group can be found in the author’s fund.
It’s always interesting to see which sector offers deep value opportunities. Recruitment agencies were a fertile ground with the onset of the recession in 2008. Housebuilders offered great opportunities in 2008 and again after Brexit. Most of the current ideas relate to the oil sector.
Deep Value Investing remains one of the only investment books in which the reader can clearly follow the thought process on specific investments of an experienced investment manager, backed with the necessary financial information. As such, I recommend it to bargain hunters.
While reading the book it becomes obvious why deep value invesitng works over time – it’s simple but not easy! There are inevitably big failures (4 case studies); you need loads of patience and perseverence. Also, some of the net-nets are very thinly traded and not always available through a generalist broker. Quality Investing is so much more comfortable…
My conculsion: there is a lot of value in Deep Value Investing, especially today afer a period of underperformance. If you cannot implement the strategy yourself, delegate to a capable manager.