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Table of Contents
1 COVER
4 PREFACE
5 PART I: MARKET ENVIRONMENT: THE 2010S AND 2020S CHAPTER 1: CHALLENGES TO ACTIVE INVESTING Active investing alpha has been falling Self-reinforcing cycle driving poor performance Why do these forces pressure investment decisions? Key investment tenets CHAPTER 2: GLOBAL CENTRAL BANK INTERVENTION Unprecedented global central bank intervention Fundamental investing overwhelmed by central bank intervention Low rates and the US consumer CHAPTER 3: ACCELERATED PACE OF TECHNOLOGY = DISRUPTION Innovation adoption tipping point Innovation and Financial Capital Outperformance potential with unprofitable but disruptive companies? Private markets overheating? Contrarianism and paradigm shifts CHAPTER 4: PASSIVE INVESTING Factor investing How far can passive investing go? Are the losers quitting the game? Financial product creation and passive alternatives CHAPTER 5: THE 2020S Economic drivers of the 2020s Continuation of technology-driven disruption American dream Populism The biggest downside risk: Loss of faith in central banks Consequences for active investing Is value investing dead?
6 PART II: CREATING ALPHA CHAPTER 6: A COHESIVE STRATEGY Aligning pieces of the puzzle Benchmarks and security selection universes that are too narrow or broad Diversification and performance goals Assets under management (AUM) relationship to strategy Matching the time horizon of the strategy to the investor base Fees in relation to the strategy return potential Shorting and your strategy Academic analysis and investment reality Firm incentives Executing the strategy CHAPTER 7: INVESTMENT PROCESS Process evolves; it is not stagnant Functions served by process Documenting and memory Investment thesis Deep work: Trying to avoid the noise Channel checks Management meetings Systems and technology CHAPTER 8: SECURITY SELECTION Superior business models Idea generation: Top down to narrow the universe Timing business cycles Roll-up acquisition strategy Other types of companies to be wary of What to look for in a company: Sales growth What to look for in a company: Operating margins What to look for in a company: Market power sustainability Management teams Being contrarian and time horizon CHAPTER 9: VALUATION Importance of valuation in fundamental versus value investing Fundamental investing: Big picture Owner's yield Free cash flow as an important metric Company balance sheet leverage Price