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Deep Value Investing: Finding bargain shares with big potential
Let the market come to you
Deep Value Investing by Jeroen Bos is an incredibly candid and revealing guide to the secrets of deep value investment. Written by an investor with a long and remarkable track record, it shares for the first time the ins and outs of finding high-potential undervalued stocks before anyone else.
Deep value investing means finding companies that are genuine bargains that can pay back phenomenally over the long term. They are firms so cheap that even if they were to close tomorrow their assets would pay you out at a profit. But if they can turn things around, the rewards will be many times greater ...
These were the favourite shares of Benjamin Graham, author of 'The Intelligent Investor'. Inspired by Graham's classic and with a long history of discovering these great value stocks - sometimes known as 'bargain issues' or 'netnets' - author and investor Jeroen Bos reveals:
- how to use only publicly available information to discover these shares and filter the gold from the dross
- everything he did when analysing, purchasing, monitoring and selling more than ten recent successful deep value investments
- the complete philosophy behind deep value investing, and the ins and outs of this strategy in practice
- what can go wrong and how to minimise the chances of it happening to you.
Deep value investing has a better track record than almost any other approach to the market. Even better, it doesn't require minute and technical knowledge of a company, nor is it fixated on earnings or often-unreliable future projections.
It's all about the balance sheet and patience. This makes it the perfect investing approach for those who want to see phenomenal stock market returns without wasting time or commission costs.
Deep Value Investing by Jeroen Bos is an incredibly candid and revealing guide to the secrets of deep value investment. Written by an investor with a long and remarkable track record, it shares for the first time the ins and outs of finding high-potential undervalued stocks before anyone else.
Deep value investing means finding companies that are genuine bargains that can pay back phenomenally over the long term. They are firms so cheap that even if they were to close tomorrow their assets would pay you out at a profit. But if they can turn things around, the rewards will be many times greater ...
These were the favourite shares of Benjamin Graham, author of 'The Intelligent Investor'. Inspired by Graham's classic and with a long history of discovering these great value stocks - sometimes known as 'bargain issues' or 'netnets' - author and investor Jeroen Bos reveals:
- how to use only publicly available information to discover these shares and filter the gold from the dross
- everything he did when analysing, purchasing, monitoring and selling more than ten recent successful deep value investments
- the complete philosophy behind deep value investing, and the ins and outs of this strategy in practice
- what can go wrong and how to minimise the chances of it happening to you.
Deep value investing has a better track record than almost any other approach to the market. Even better, it doesn't require minute and technical knowledge of a company, nor is it fixated on earnings or often-unreliable future projections.
It's all about the balance sheet and patience. This makes it the perfect investing approach for those who want to see phenomenal stock market returns without wasting time or commission costs.
216 pages, Paperback
First published November 4, 2013
14 people are currently reading
354 people want to read
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Displaying 1 - 15 of 15 reviews
January 27, 2021
Read this book a couple of years ago and recently re-read my notes - many of the "lessons" are still applicable and the book is well worth reading. Below are some of my notes:
Jeroen Bos was a disciple of the legendary investor Peter Cundill and has since 2003 managed the British fund Church House Deep Value Investments. Over the past five years, he has underperformed his benchmark index; 10.9% annually compared to 19.1% [2020]. The book was published in 2013 and describes Bos’s investment philosophy through 15 case studies.
BUY ASSETS AT DISCOUNT. The deep value philosophy is to invest in discounted assets. This is done by buying shares in a company whose market capitalization is lower than its net assets, or even better, lower than its net cash. This type of investment can only be made on the stock exchange. In the private market, owners would seldom sell their company below net cash or below the total net worth of assets.
ASSETS INSTEAD OF PROFITS. The deep value philosophy differs markedly from other investment philosophies as the focus is on assets instead of profits. A company’s asset base changes slowly compared to stock prices and profits, which are often volatile. It is rare for a company’s equity to fall by 50% over a year, something that is quite common for a company’s profit level. However, all assets aren’t created equal. The more easily realized the assets are, the more secure you as an investor can be in the carrying values. Cash, receivables and inventories are more liquid than fixed assets, which in turn are significantly more liquid than intangible assets.
“The markets short-termism and obsession with earnings is a common factor in creating good cheap shares for deep value investors.”
LOOK WHERE NO ONE ELSE IS LOOKING. Deep value investors must not be afraid to go where no one else goes – this is where the deep value stocks are. Bos’s portfolio usually consists of about thirty companies whose names are not known in “The City” and who also often are loss-making. He also likes to look at non-UK companies that are listed on the LSE as analysts and managers rarely have an interest in these companies.
“It is often said that this kind of equity investing must be quite risky. Unsurprisingly, I disagree! The companies may look distressed and be down in the doldrums. But we are largely purchasing liquid assets at a discount. It’s like paying £20 for a £50 note. If these deep value stocks drop further after we’ve bought them, it usually means a chance to simply buy more for less–£50 for £10 or £5. The long term is what matters. And quality will out: either other investors will notice, or other companies will swoop in for a buyout.”
SKIP THE ESTIMATES. By not focusing on the profits, Bos does not have to make any forecasts – something that very few anyway are good at. This means that he does not need to study the company in depth to understand exactly everything that drives sales and margins. He can focus on the balance sheet, invest and move on to the next case.
SHIFTS FROM VALUE TO MOMENTUM. Once a company reports improved profits and the stock picks up speed, Bos ceases to be a value investor. He instead becomes interested in what the markets expectations of the company. Bos will sell into an earnings-driven market, and then wants to sell when Mr. Market is in his best mood – when the stock is “priced for perfection”.
”To sell these stocks when they hit their net asset value, as some value investors would insist, would mean that my upside might only be some 10% or so. But by waiting for the earnings to re-establish again, they can easily go up 100% or 200%.”
DEBT COMES IN DIFFERENT FORMS. Not all interest-bearing liabilities carry the same risk. Bos has been burned on companies that have a large overdraft facility in relation to the asset base. In tough times, it is not certain that it will continue to be granted – which can put the company in liquidity problems overnight. Bos prefers to see short-term as well as long-term debts that expire on a certain date – they do not disappear just because a financial crisis arises.
AVOID INDEBTED COMPANIES. Bos is careful with heavily indebted companies. Although the margin of safety may seem large, it can change quickly through a combination of large debts and a deteriorating market climate. He also believes that it is of great importance to review the pension debt. In the United Kingdom, it has gone so far that some operating companies have taken on the character of a pension fund with an associated ancillary activity.
Jeroen Bos was a disciple of the legendary investor Peter Cundill and has since 2003 managed the British fund Church House Deep Value Investments. Over the past five years, he has underperformed his benchmark index; 10.9% annually compared to 19.1% [2020]. The book was published in 2013 and describes Bos’s investment philosophy through 15 case studies.
BUY ASSETS AT DISCOUNT. The deep value philosophy is to invest in discounted assets. This is done by buying shares in a company whose market capitalization is lower than its net assets, or even better, lower than its net cash. This type of investment can only be made on the stock exchange. In the private market, owners would seldom sell their company below net cash or below the total net worth of assets.
ASSETS INSTEAD OF PROFITS. The deep value philosophy differs markedly from other investment philosophies as the focus is on assets instead of profits. A company’s asset base changes slowly compared to stock prices and profits, which are often volatile. It is rare for a company’s equity to fall by 50% over a year, something that is quite common for a company’s profit level. However, all assets aren’t created equal. The more easily realized the assets are, the more secure you as an investor can be in the carrying values. Cash, receivables and inventories are more liquid than fixed assets, which in turn are significantly more liquid than intangible assets.
“The markets short-termism and obsession with earnings is a common factor in creating good cheap shares for deep value investors.”
LOOK WHERE NO ONE ELSE IS LOOKING. Deep value investors must not be afraid to go where no one else goes – this is where the deep value stocks are. Bos’s portfolio usually consists of about thirty companies whose names are not known in “The City” and who also often are loss-making. He also likes to look at non-UK companies that are listed on the LSE as analysts and managers rarely have an interest in these companies.
“It is often said that this kind of equity investing must be quite risky. Unsurprisingly, I disagree! The companies may look distressed and be down in the doldrums. But we are largely purchasing liquid assets at a discount. It’s like paying £20 for a £50 note. If these deep value stocks drop further after we’ve bought them, it usually means a chance to simply buy more for less–£50 for £10 or £5. The long term is what matters. And quality will out: either other investors will notice, or other companies will swoop in for a buyout.”
SKIP THE ESTIMATES. By not focusing on the profits, Bos does not have to make any forecasts – something that very few anyway are good at. This means that he does not need to study the company in depth to understand exactly everything that drives sales and margins. He can focus on the balance sheet, invest and move on to the next case.
SHIFTS FROM VALUE TO MOMENTUM. Once a company reports improved profits and the stock picks up speed, Bos ceases to be a value investor. He instead becomes interested in what the markets expectations of the company. Bos will sell into an earnings-driven market, and then wants to sell when Mr. Market is in his best mood – when the stock is “priced for perfection”.
”To sell these stocks when they hit their net asset value, as some value investors would insist, would mean that my upside might only be some 10% or so. But by waiting for the earnings to re-establish again, they can easily go up 100% or 200%.”
DEBT COMES IN DIFFERENT FORMS. Not all interest-bearing liabilities carry the same risk. Bos has been burned on companies that have a large overdraft facility in relation to the asset base. In tough times, it is not certain that it will continue to be granted – which can put the company in liquidity problems overnight. Bos prefers to see short-term as well as long-term debts that expire on a certain date – they do not disappear just because a financial crisis arises.
AVOID INDEBTED COMPANIES. Bos is careful with heavily indebted companies. Although the margin of safety may seem large, it can change quickly through a combination of large debts and a deteriorating market climate. He also believes that it is of great importance to review the pension debt. In the United Kingdom, it has gone so far that some operating companies have taken on the character of a pension fund with an associated ancillary activity.
March 6, 2016
I'm glad that there's a few books about deep value out there. Jeroen Bos who's is a experienced deep value investor explains in this books about his past investments; how he's looking for bargain stocks in the services sector and in a very brief way he also explains what is to be a deep value investor.
This book is recommend to every value investor that is interested in the bargain style of Ben Graham.
This book is recommend to every value investor that is interested in the bargain style of Ben Graham.
May 9, 2016
An OK book. I really wish it would have been more detailed and tackled the fine print of modern deep value investing. It suffers from gross oversimplifications throughout the book to be anything special.
There is a 500+ page appendix available for free on the website with the mentioned companies statement releases. This is a very good added feature which, with some work, you can follow along the story and dig deeper on your own accord.
There is a 500+ page appendix available for free on the website with the mentioned companies statement releases. This is a very good added feature which, with some work, you can follow along the story and dig deeper on your own accord.
February 24, 2016
Some solid points focussing on net/net investing in smaller companies. "Deep value" means different things to different investors but the author's simplification in his analysis of balance sheet items goes against what this reader thinks of as "deep value". The disdain for the balance sheet value of "goodwill" items, however, is refreshing!
June 12, 2023
Със смесени чувства съм. Авторът е избрал особен подход да обясни стратегията си на deep value investment, като разглежда различни компании, в които е инвестирал и съответно - колко е спечелил/загубил. Цялата книга се състои само от това, което е причината за моите смесени чувства. Щях да се радвам на някакво обобщение, но се предполага, че читателя сам трябва да стигне до съответните изводи, докато разглежда отделните инвестиции една по една. Не казвам, че книгата е лоша. В нея има наистина много материал за размисъл, стига да отделиш спецификите, но според мен е непълна. Ако авторът наистина си беше направил труда да вкара една-две глави тип "summary" книгата определено щеше да светне. О, и още нещо особено - книгата разглежда компании от британския пазар, защото самия автор е британец.
June 7, 2020
Practical
Very very very practical. Most think there's very deep secrets to great success and probably would dismiss uncommon but very simple ideas such as those found in this book - I'm very interested in learning about deep value investing and to me this is great book. I wish I could meet Jeroen. Worth it....
Very very very practical. Most think there's very deep secrets to great success and probably would dismiss uncommon but very simple ideas such as those found in this book - I'm very interested in learning about deep value investing and to me this is great book. I wish I could meet Jeroen. Worth it....
March 4, 2025
In this book author explains his investing strategy of deep value investing and provides many examples. Key advice to remember:
1. Always try to see opportunity, don't be judgmental
2. Do I/S, B/S ,C/F analysis, try to figure inherent company value, buy stocks if they cost less than that presumed value
3. Ask yourself what could change the current position of the company in the market?
1. Always try to see opportunity, don't be judgmental
2. Do I/S, B/S ,C/F analysis, try to figure inherent company value, buy stocks if they cost less than that presumed value
3. Ask yourself what could change the current position of the company in the market?
October 26, 2021
As a more earnings focused investor, I found the balance sheet focused approach detailed here useful in expanding my toolkit for assessing potential investments. Well worth a read.
December 2, 2021
Decent, backed up with concise examples
June 25, 2024
Good overview with case studies on deep value investing
December 6, 2016
It's a very practical books with two chapters about his philosophy and method and the rest are case studies from his own investments, including two failed ideas. He focused solely on Ben Graham's net-net method, which "net" him 50-300% return ideas.
However, some are missing:
his track record, it was never mentioned so we don't know if he throws a "net" and reported only the winning ones.
A lot of ideas came during 2008-2009 (GFC) and even in 2011 - 2012 (crisis). It may not work during normal time.
so after making money by buying these net-net and realized some profits, investors can sit out for a long time (until the next crisis, which don't come too often). not a fun, and profitable thing to do.
also the strategy is not scalable as it cannot put a lot of capital to work, these companies are all less than 100 mn market cap
However, some are missing:
his track record, it was never mentioned so we don't know if he throws a "net" and reported only the winning ones.
A lot of ideas came during 2008-2009 (GFC) and even in 2011 - 2012 (crisis). It may not work during normal time.
so after making money by buying these net-net and realized some profits, investors can sit out for a long time (until the next crisis, which don't come too often). not a fun, and profitable thing to do.
also the strategy is not scalable as it cannot put a lot of capital to work, these companies are all less than 100 mn market cap
June 29, 2016
I like this book because it's short, simple, and practical. Instead of giving you a formula (like Joel Greenblatt's Magic Formula, or the Deep Value "Acquirer's Multiple"), this book tells you what an active fund manager looks for in value buys. Service companies in cyclical industries that are light on fixed assets that are net-nets or at least below NAV. The book goes through case studies of successes, failures, and even the author's current positions (as of the book's writing) and helps you learn to think like a value investor. Great read.
March 10, 2018
Deep Value Investing is a collection of 14 deep value investment cases by Jeroen Bos - listing few in which he already made decent money and exited, ones where he went wrong and the ones he was still holding on to at the time of writing this book. He has explained his thought process behind all of these investments. It's a short, nonetheless a very useful and informative book. Investors can pick his ideas and try replicate or improvise on them in their portfolio.
December 13, 2016
It is not ofter we hear from a successful investor about their thought process applied to cases. The book does just this, it is all case-studies. I found many nuggets of wisdom in there and would recommend people reading it, since it is a short and straightforward book one could probably finish in an afternoon.
December 28, 2016
Very practical book full of real examples of value buys along with investing rationale. It was good to see that the author included investments that turned out to be value traps and lessons learned.
Displaying 1 - 15 of 15 reviews