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Book reviews: Vitaliy Katsenelson’s “Active Value Investing” and Timothy Sykes’s “An American Hedge Fund”
Topics: booksSeveral weeks of extensive business travel and the dismal on-time performance of American and United Airlines gave me time to read two recent investing books.
The first, Active Value Investing: Making Money in Range-Bound Markets by Vitaliy Katsenelson, is a deep exploration into the metrics that lead to superior stock performance in flat or even bear markets. Katsenelson stresses three factors: quality, valuation, and growth. The book provides very detailed methods for examining each factor. If you have had the pleasure of reading Marc Faber’s excellent book Tomorrow’s Gold, Active Value Investing will seem familiar. Katsenelson brings to a micro, company-specific level the same type of data-intensive analysis that Faber does on a macro level.
by Vitaliy Katsenelson, is a deep exploration into the metrics that lead to superior stock performance in flat or even bear markets. Katsenelson stresses three factors: quality, valuation, and growth. The book provides very detailed methods for examining each factor. If you have had the pleasure of reading Marc Faber’s excellent book Tomorrow’s Gold, Active Value Investing will seem familiar. Katsenelson brings to a micro, company-specific level the same type of data-intensive analysis that Faber does on a macro level.Though some of the specific methods outlined in the book, like Katsenelson’s valuation models, are better suited for larger, more mature stocks, many of the concepts he discusses are applicable to microcap stocks. For example, he urges investors not to think of P/E multiples as linear functions. Katsenelson emphasizes that multiples fluctuate as well as earnings. As a result, investors need to be cognizant about the potential for multiple expansion or contraction, as well as changes in absolute earnings. Highlighting this factor is just the beginning — Katsenelson backs up his analysis with decades of data demonstrating that multiples, across markets, tend to be mean reverting. In other words, high multiple stocks are likely to face compression over time, which can provide a stiff headwind unless the absolute earnings skyrocket. Low multiple stocks, in contrast, tend to benefit from multiple expansion, and therefore can increase in price without substantial gains in absolute earnings.
I learned quite a bit from my first read of Active Value Investing, and will undoubtedly learn even more the second time around.
I also enjoyed Tim Sykes’ An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund, but for very different reasons. An American Hedge Fund is not a trading book; it is pure entertainment. Sykes gives a blow-by-blow recap of how he parlayed his Bar Mitzvah windfall into The Cilantro Fund. If you traded through the crazy internet blowoff, this book will be a fond trip through memory lane.
, but for very different reasons. An American Hedge Fund is not a trading book; it is pure entertainment. Sykes gives a blow-by-blow recap of how he parlayed his Bar Mitzvah windfall into The Cilantro Fund. If you traded through the crazy internet blowoff, this book will be a fond trip through memory lane.Sykes is very guarded about the insights he learned, perhaps saving those for his $297 DVD set. That is too bad. While he certainly has his critics, it is hard to contest that Sykes did a few things exceptionally well. First, at a very young age, he detected a viable strategy by focusing on the intraday price and volume patterns of thinly-traded stocks, especially their performance in the closing hour. More impressively, he realized exactly when that pattern stopped working, and correctly determined that its failure foreshadowed a failure in the overall market, leading Sykes to switch to the short side. There are also great lessons to be learned from Sykes’ mistakes. Perhaps his greatest error was throwing all discipline to the wayside and dumping a perverse proportion of assets into Cygnus, a pink sheets reverse merger that Sykes was overconfident about because he knew the company and its owners, and was permitted to participate in private funding deals.
I would have enjoyed An American Hedge Fund more if Sykes directly addressed the trading lessons he learned, and how he thought they could be applied going forward. Nevertheless, if you love the markets and enjoy reading about them, An American Hedge Fund will be a few hours well spent.
Book contest: Have a great stock idea? E-mail me with a description of the stock and your analysis of its benefits and risks. I will send a copy of Vitaliy Katsenelson’s Active Value Investing to the reader providing the best submission.
Hey, great review, but FYI my DVD set is $297, not $594. Please correct that, thanx!
Tim is right — my error (apparently the price I first noted was for a quantity of two, though I’m not sure how it got set that way).
I READ SYKES WORTHLESS BOOK AND IT HAS NO SUBSTANCE. THERE ARE PLENTY OF OTHER BOOKS THAT COVER THE SAME SUBJECT MATTER FROM PEOPLE WHO HAVE A RIGHT TO EVEN AUTHOR A BOOK ON THE SUBJECT.
THIS WORTHLESS BOOK IS JUST AN ATTEMPT AT COMING UP WITH A CATCHY TITLE TO GENERATE HITS ON A SEARCH ENGINE. SAME OLD TIRED INFORMATION PRESENTED.
SYKES IS A FAILED HEDGE FUND MANAGER, NOW BECOMING A SNAKE OIL BOOK SALESMAN. BOOK NOT WORTH $20.
I read Tim Sykes mediocre hedge fund book since I knew him at Tulane, and like him as a person. However, the book is an empty and uninspiring story about how Sykes became a self-absorbed irresponsible stock trader. This book is NOT a “classic” and story is NOT “Rocky-like”(as author Sykes claims). This book is basically like a blog of an average person who got lucky trading stocks and then his luck ran out (which it really should be - blog and nothing more).
Beware of all the phony glowing reviews for Sykes Book. Its the good ole boy network in high gear where authors/investment advisers use the buddy system to give fake good reviews to each other.
Sykes put the term “stock operator” in title in order to confuse all future book searches for Jesse Livermore’s excellent story (Reminiscences of a Stock Operator, by Edwin Lefèvre (1923)). This cheesy trick might help book sales, but needless to say, Sykes has nothing in common with the great trader Livermore.
Sykes comes across like a hyper/immature/video game player-type Trader, which worked for him for a few years; then the law of averages caught up with him. His “return to the mean” continues during the past two years; and his very poor investment strategies are DOWN -37% since Jan 2006. His continuous bad performance throughout 2007 shows that he does not learn from his mistakes; and readers can only cringe while watching Sykes slow motion demise into a worthless snake oil salesman.
Ok, I just recently learned of this guy, Tim Sykes, and have visited the web site he set up, read his book , and watched a few of his idiotic appearances on various news outlets such as CNBC. This is HILARIOUS.
Tim, if you are reading this, listen up:
Much of what I’ll say is redundant but you know NOTHING about what you claim to know about. You are a rank amateur who has learned enough surface information about an industry so as to come across as being knowledgeable enough about it to teach to others. The only people that take you seriously are complete newcomers to this game that know next to nothing, because to a complete amateur you sound like you know what you are talking about. You have learned enough about trading to pretend and claim to have traded and that’s about it.
Trading your parents money via an online retail account is not a fund, but is laughable. Your story is just that, a story. “I turned my 12k bar mitzvah money into 2 million”. It reads like bad spam I get in my inbox but the journalists eat it up like cake. Your web site is hilarious because you are an enormous idiot and I will continue to visit it for free laughs. I wonder if you know how stupid you are or if you have truly convinced yourself that you have learned something valuable enough to write about?
[...] Just got another great book review from one of the most popular microcap websites, The Microcap Speculator . Finally, somebody gets that “An American Hedge Fund is not a trading book; it is pure [...]