Rory Gillen's new book: 3 Steps to Investment Success

Marc said:
Rory,

I happen to prefer French wine to Spanish but equally that has nothing at all to do with my point either.

I made the same point recently and you took the same tack. Perhaps we can stick to the issues....

This is a simple question of statistics. We want to know if there is true alpha in any strategy once we adjust for risk. By which I don't mean standard deviation from the mean incidently, as that would not pick up the value premium, but rather excess return as measured by growth stocks minus value stocks.

As I pointed out before ( http://www.askaboutmoney.com/showthread.php?p=1228515#post1228515) the UK value premium since 1955 has been about 3% above the FTSE. This is available to all investors essentially for free from following a diversifed value strategy. So, what i want to know is how much alpha does your strategy generate above this benchmark?
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Enjoy the book, the answers are in it.
 
Firefly said:
Hi Rory,

As a novice investor, I must say that this post will almost certainly mean I won't be buying your book this Christmas.

Firefly.
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Hi Firefly,

While I don't really know Rory - met him once recently - I suspect that his comment was just intended as an attempt to stop this thread veering too far from its original purpose - a review of his book.

Marc and Rory have differing views on investing which have been aired at great length elsewhere on this site. This wouldn't be the right thread in which to start yet another debate on the relative merits of the different investment theories recommended by each.
 
Got this book for Christmas. Unlike the Duke, before reading it, I had anticipated finding much of interest in it. Like him, however, I found much of it disappointing.

The absolute low point of the book for me was the FAQ - "but if it is all so easy, why aren't the professional fund managers following these approaches?". Clearly, this is the key point and unfortunately, in addition to being insulting to trustees, the response is biased almost beyond belief from someone who ought to know better!!
 
First, well done Rory on your book. It is no small undertaking, it is a real accomplishment. I found the book to be well written, with a clear, and flowing style of writing. A reader could easily read and understand what you're communicating, and that's the starting point for all good books.

On the content side, I think that for a beginning investor the material is pitched at the right level. Delving deeper, there are some elements that made me think: "I'd love to discuss that with him to understand why he constructed it that way." For example, the principal investment idea seems to be that of investing using the P/E or value-based re-balancing approach (underpinned by the idea of diversification/risk reduction). Yet, an earlier chapter broached the concept of valuation and this was dealt with very lightly when you explained your selection system. Equally, you suggest omitting any consideration of economic backdrop, competition etc when valuing a company. Your reason is that there is a lack of data. I can't say that I would agree with that, as data is available to the average investor. Perhaps, the challenge for the investor is to know where to access the data. Equally, the terms you label as qualitative and quantitative factors are, in my opinion, more properly deterministic in relation to the qualitative and indicative in relation to the quantitative, in respect of future growth. Again, I appreciate that it's a judgement call as to what you leave in and omit, and this judgement has to have the audience in mind always.

A small point but I would have liked more visibility on how various calcs were completed. For example the ten year earnings to price calf on the FTSE. There are several confounding factors for this calculation. If you have any details on it that you can share then I'd be grateful to have a look.

All in all, it's a book I could give to my dad to read if he had questions about investing, or to anyone who is starting on the journey, or has traveled a while and wants to learn more, and I believe that they would learn from it and benefit from it. Well done!
 
elacsaplau said:
Got this book for Christmas. Unlike the Duke, before reading it, I had anticipated finding much of interest in it. Like him, however, I found much of it disappointing.

The absolute low point of the book for me was the FAQ - "but if it is all so easy, why aren't the professional fund managers following these approaches?". Clearly, this is the key point and unfortunately, in addition to being insulting to trustees, the response is biased almost beyond belief from someone who ought to know better!!
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Elacsaplau,

It is my experience that the vast majority of pension trustees know very little about the investment side, and what makes a good fund manager and what doesn't. No insult intended, just an observation. I read plenty of investment books myself, it's a hobby but also I find I learn something new every time. Also, I often find a better way to communicate a point, which is important for the 1-day investment training seminars I give. To read a book, select just one point and be wholly negative on it strikes me as rather defensive. Each to their own I guess.

Rory Gillen
Founder, GillenMarkets
 
Orga,

I haven't been on this site for a while and hence the late reply. I appreciate the balanced review. One must accept the negative reviews with the positive ones. I choose, for mainly marketing purposes, not to avail of anonymity on this website. The GillenMarkets Investment Newsletter is the only one of its kind in Ireland and I'll market it whenever I can. In my view, private investors lack access to independent analysis, commentary and views on investing. The Internet has afforded someone with experience to provide such a service at a very affordable cost. Giving wholly critical or negative reviews while availing of anonymity is not a course I would choose to take myself. But each to his own!

I read James O'Shaughnessy's book 'Invest Like the Best' in the late 1990s and it opened my mind to an alternative way of selecting stocks. I remain very grateful for the opportunity to have read it.

The traditional way of selecting stocks is to know the company, market it is in and to assess the value on offer etc. and to then make up your own mind having assembled the facts. Nothing wrong with that! However, the fact is that you are most unlikely to beat the average returns available from equities doing it that way. None of us are Warren Buffett, myself included. Most professional fund managers approach stock selection in this way, and the entire industry of stockbrokers and analysts is geared to serving that need. That, however, does not make it the best way.

There is an alternative way, and Chapter 21 of the book 'Enhancing Returns: Value Investing in the FTSE 100 Index' was simply included to demonstrate to readers that individual investors have choices in terms of how to build a portfolio of stocks. I also had hoped that such a chapter would have caught the imagination of the UK media to which I sent the book for reviews. Alas, I failed in that regard. They showed no interest, which in many ways tells me why such a simple approach can continue to outperform unnoticed. There are those on this website who argue that what I put forward cannot be so, as the markets are efficient. But they simply refuse to deal with facts.

One of the bugbears for all of us is our emotional responses to market and company events. We often panic at the wrong time and this leads to poor decision making. Using a simple robotic technique that, at its core, achieves good diversification and a value tilt is more powerful than many investors can imagine. It takes the emotion out of investing, and that's most of the battle. It has nothing to do with intelligence. The most intelligent of people often make a mess of stock market investing due to overriding emotional responses to volatility driven by negative near-tern news flow.

I said it in the book that it is management that generates the returns on the business's assets. The investor’s job is to obtain value on the way in. The simple fact is that investors over-react to short-term news flow in markets and the FTSE 100 Value approaches I have developed take advantage of this market anomaly or human behaviour.

It's important for readers on this website to understand that such an approach does not reflect my opinions, it reflects the facts that I have patiently gathered over the years. And let me outline the up to date statistics for those reading this blog;

The approach of buying 15 stocks on the lowest price-to-earnings ratio from the FTSE 100 Index and diversifying across sectors has delivered a 12.7% compound per annum return over the 19-year period from 1995 to 2013 inclusive. In comparison, the returns from the FTSE 100 Index itself were 8.2% compound per annum and 7.7% from the FTSE World Equity Index over the same period. That's 4-5% per annum ahead of general equities by simply following, with discipline, some basic rules.

To finish off, you made the following point: "A small point but I would have liked more visibility on how various calcs were completed. For example the ten-year earnings to price calc on the FTSE. There are several confounding factors for this calculation. If you have any details on it that you can share then I'd be grateful to have a look."

I don't follow the question but if you posted it again in a different way or emailed me to rory@gillenmarkets.com I'd be glad to clarify.

Rory Gillen
Founder, GillenMarkets.com
 
Rory Gillen said:
It's important for readers on this website to understand that such an approach does not reflect my opinions, it reflects the facts that I have patiently gathered over the years. And let me outline the up to date statistics for those reading this blog;
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Now seriously Rory, how long could it possibly have take you to replicate the Dogs of the DOW??? By 1993 I and several others that I know of were already replicating it on the DAX and the SMI. I'm sure there have been many others doing the same over the years, because it is a widely know technique.
 
Jim2007 said:
Now seriously Rory, how long could it possibly have take you to replicate the Dogs of the DOW??? By 1993 I and several others that I know of were already replicating it on the DAX and the SMI. I'm sure there have been many others doing the same over the years, because it is a widely know technique.
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No one has said otherwise. It is not the same approach as 'Dow of the Dow' but there are strong similarities. In my book, I outline exactly where the approach has come from, and it is 'Contrarian Investment Strategies' as written by David Dreman. A great book. All I have done is to take Dreman's approach into the UK market, but in doing so I have gathered the data in real time methodically since 1995. That's useful data, in my view. And an understanding as to why a mechanical approach can work well is just as, if not more, important than the rules themselves be that 'Dogs of the Dow', Contrarian Investment Strategies or Joel Greenblatt's 'Little Book That Beats the Market'.

It seems to me that some on this site some see nothing but cynicism. But I would imagine that the vast majority are trying to learn a little, and I contribute for that reason.
 
I've had this book on my shelf for 7 years and have just got around to reading it, how's that for procrastination!
I found it very informative, I wonder though has anyone followed Rory's system of value investing in the FTSE 100?
A few years have passed since publication so it would be interesting to know how the system has faired since then.
 
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