Book Review: Active Value Investing: Making Money in Range-Bound Markets (Hardcover)

Active Value Investing: Making Money in Range-Bound Markets (Hardcover)

By: Vitaliy Katsenelson

If you are told to invest in mutual funds because you are told these funds would rise, would you blindly take this advice and expect funds to rise? The vast majority would do so.

If you started playing in the stock market, would you consider only price (Google is $600) and not value (Google has an intrinsic value of... Google has a quality value of... Google has a growth rate of...)? You are not alone. Most do so.

In the first case, investors are led to believe that stocks must rise, because they have always done so historically. Yet, there are exceptions: Japan.

Japan has been in a trendless market for 20 years. 20 years of net zero returns is a long time of nothing, to exasperate the idea of non-performance.

In Active Value investing, the author discusses the approach to take in earning a return in an environment where stocks trend up and down.

The viewpoint that North America is currently range-bound is not common.

You would be almost alone (along with the author) on this call.

This book compliments my need to approach in a market that is range-bound. For example, many countries (with some exception ie China and Brazil) are facing a balance sheet recession. This will mean that the government has limited capacity in taking a Keynesian approach to stimulate the economy.

Any strength by sector will be met with resistance and counter forces that pull that sector back down.

As a side note, in my analysis of companies such as Netflix, Cree, and Riverbed Technology, all three companies exceeded my price targets. These companies (in a virtual portfolio) were sold after the target was reached, upon which, the shares kept rising (Netflix rose from a target price of $62 to $100, Cree is $79.22 and Riverbed, with a target price of of $27, is now $33).

The author’s quantitative approach to analyzing the market is simple: QVG – Quality, Valuation, and Growth. This approach is consistent with the teachings of Graham (Margin of Safety).

It is also consistent with my own approach to valuation analysis using ranges of value. I first learned about this approach from my readings of and online lecture review from Seth Klarman.

The author encourages discipline in buying and selling securities. The author accomplishes this by teaching the reader to strip out the emotional aspect attached to investing.

This is a worthwhile read for any investor who does not want to be a fool, by being a mere member of the herd. Expressed another way, the author teaches the reader to avoid belonging among the vast majority of participants who invest in the stock market.

Active Value investing is available on Amazon.

Sponsored Post: Keryx Biopharma (NASDAQ:KERX) Product Development Update

Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX) is an emerging biopharma company that has a pair of lead compounds in late stage development: Perifosine for the treatment of cancer and Zerenex for patients suffering from renal disease.

Last December, Keryx announced the initiation of a Phase 3 pivotal study of Perifosine (KRX-0401), the Company's PI3K/Akt pathway inhibitor (a cell signaling pathway that disrupts the normal cell cycle / programmed cell death and leads to chemotherapy drug resistance in some cancer cells), in multiple myeloma patients under a Special Protocol Assessment (SPA) with the FDA with Fast Track designations for this indication.

Perifosine is in-licensed by Keryx from Aeterna Zentaris. Keryx expects a patient recruitment period of approximately 16-18 months and expects to report data from this study during 2H11. In addition, a refractory metastatic colorectal cancer (mCRC) study under SPA is expected to begin 2Q10 with projected completion 2H11.

During the first week of 2010, Keryx announced that it has reached agreement with the FDA regarding a SPA for the design of a Phase 3 clinical program for Zerenex (ferric citrate), which is the Company's iron-based phosphate binder for the treatment of elevated serum phosphorous levels (hyperphosphatemia occurs in the majority of dialysis patients, resulting in serious medical complications such as blood vessel calcification and skeletal deformities since phosphate is a major component of bone along with calcium) in patients with end-stage renal disease (ESRD) that are on dialysis.

Zerenex works by forming iron-phosphate complexes in the gut that are not absorbed since patients with ESRD are prone to electrolyte disorders such as elevated phosphorus due to the absence of normal kidney function. In accordance with the Company's SPA agreement with the FDA, the Phase 3 clinical program for Zerenex will consist of two clinical studies, including (1) a short-term efficacy study that is expected to commence by the end of 1Q10 with date expected during 2H10; and (2) a long-term safety and efficacy study that is expected to begin mid-2010 with data expected and a NDA filing expected during 1H12.

Keryx has retained all key commercial rights for its two lead compounds and has the resources to complete Phase 3 development for both of its lead compounds, which provides more leverage in partnership discussions. The estimated cash burn rate for 2010 is $1.3 million per month or approximately $4 million per quarter and $16 million for the entire year.

This is a sponsored post placed by IR GRO on behalf of ProActive Capital. Please visit the ProActive News Room for more details on Keryx.