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.

CUSTOMER REVIEWS (Average Customer Rating: 4.5 based on 39 reviews)

Better second time around

This is a fine addition to any investor's bookshelf.

On first reading, I thought it decent, but a bit shallow. But it has one of the best, and most accessible, discussions of how to value a business I've ever read. Many times I've used similar "thought experiments", attempting to reduce the complexities of publicly traded companies' financials to simple, but realistic examples, like Vitaliy does with "Tevye the Milkman" and his cows.

It was sometime after that initial read, and while I was re-reading selected sections that I realized this is a VERY GOOD book. And now, in that way we all have of simplifying concepts, when people ask me about my investment perspective, I kind of just point to Vitaliy. "He says it best." I counter that deification by keeping the book on top of the toilet.

Aside from the character Tevye, the main take away for me is about when, and why, to sell. Vitaliy makes a convincing case that we are destined to spend decades in range-bound markets, especially after long bull runs like the end of the 20th century. But from the inside, the ranges are large enough that we don't really see it, but instead experience it as separate bull and bear markets. The difference is that by the end of the long range period, there has been no net progress. Knowing that in advance, being able to see "outside the range", seeing the box we're in for what it is - that's what this book is about.

December 17, 2008

Very Good advice for all levels of investors.

I ordered this book because it was recommended by John Mauldin in his newsletter "Outside The Box", which I highly recommend. The newsletter is free via email.

This book is quite detailed but is an "easy and interesting read" given the nature of the subject. It is written such that investors of all backgrounds can read at their own level and benefit from the authors knowledge and insight.

Even though the book targets range-bound markets, bull/bear strategies are adequately discussed. Active value investing applies to all market conditions.

December 16, 2008

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".
April 14, 2008

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.
February 18, 2008

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.
February 07, 2008

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