Table of Contents

Chapter 1 – Focus Investing
Chapter 2 – The History of Speculation
Chapter 3 – Psychology
Chapter 4 – The Mental Framework of Investing
Chapter 5 – Beware of Wall Street
Chapter 6 – Fundamental Investing Concepts for a Focus Portfolio
Chapter 7 – Accounting Red Flags
Chapter 8 – Annual Report& Proxy Statement Analysis
Chapter 9 – Valuation
Chapter 10 – The Role of Diversification
Chapter 11 – Technical Analysis and Market Forecasting
Chapter 12 – Arbitrage
Chapter 13 - Summary

Appendix A – Outstanding Companies
Appendix B – Company Research Example
Appendix C – Valuation Example
Bibliography
Index

Excerpt from Chapter 1:

In his seminal investment text The Intelligent Investor, Benjamin Graham wrote, “… [T]he investor’s chief problem – and even his worst enemy – is likely to be himself.” Why did he write this? Because he knew investors become trapped by the belief they can make a quick profit just trading what is popular at the moment. They believe they will always find someone willing to buy what they are selling for a higher price.

The Focus Investor is for the investor who does not want to become trapped or to become his own worst enemy. To avoid this trap, an investor needs to take a long-term approach grounded in a solid understanding of the businesses in which he is investing – an approach I call “focus investing.”

What defines a focus investor? Focus investors are similar to what the investment world defines as value investors. Like value investors, we believe in conducting fundamental analysis of a company we are interested in investing in; we believe in the margin of safety concept; we understand the psychological forces that shape the stock market; and we agree with Benjamin Graham’s definition of an investment operation as “one which, upon thorough analysis promises safety of principal and an adequate return.”

What sets a focus investor apart from value investors is (1) our willingness to concentrate our portfolio by only purchasing investments that present the highest probability of outperforming the market over the long-term and (2) possessing the temperament that allows us to deal with the financial and psychological issues that arise from owning a concentrated portfolio.

Focus investing looks at the importance of conducting fundamental analysis of potential investment companies and paying as low a price as possible for a company’s shares. This approach consists of three elements:

(1) Finding quality businesses with sustainable competitive advantages selling at advantageous prices.

(2) If such opportunities cannot be found in the current marketplace, searching for companies that are selling at significant discounts to their intrinsic value even if they tend not to possess significant competitive advantages.

(3) Searching out arbitrage opportunities as they present themselves in the market.