Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations

Praise for Deep Value "I highly recommend Deep Value . It takes a lively look at a variety of value investing strategies starting with the father of security analysis, Ben Graham. It outlines how individual investors can vastly outperform simple index strategies. For these value strategies to work, investors must be patient and brave, as it requires looking at stocks that the herd ignores. It will be a useful addition to any value investor's library." —Jim O'Shaughnessy, Chairman and Chief Executive Officer, O'Shaughnessy Asset Management, LLC, and author, What Works on Wall Street "Value investing is the most intuitive form of investing ever devised—the attempt to buy one dollar's worth of assets for sixty cents. In his new book, Carlisle provides a thoroughly contemporary guide to the discipline, informed by killer anecdotes. Deep Value is part historical saga, part treasure map—a must-read for all investors." —Joshua M. Brown, author, The Reformed Broker blog and the bestselling book Backstage Wall Street ; star of CNBC's The Halftime Report ; Chief Executive Officer, Ritholtz Wealth Management " Deep Value is a refreshing and highly entertaining work that makes a persuasive case for traditional value investment and a revival of Graham-style 'ownership consciousness'. It is a compelling addition to the value investing canon." —Vitaliy Katsenelson, Chief Investment Officer, Investment Management Associates, Inc., and author of The Little Book of Sideways Markets "From accounts of bold corporate raiders and behavioral psychology to hard quantitative research, Deep Value leaves no stone unturned in a passionate exploration of what makes value investing and activism work." —Christopher Cole, CFA, Founder and Managing Member, Artemis Capital Management, LLC "In Deep Value, Carlisle provides a qualitative and quantitative view of why value investing has worked since the time of its conception. The book is a unique combination of careful descriptions of the value styles and players, backed up by data that supports the conclusions reached. I strongly recommend this book to the value aficionado." —Michael van Biema, Founder and Chief Investment Officer, van Biema Value Partners, and co-author, Value Investing: From Graham to Buffett and Beyond "Carlisle has written an engaging history of the market and its influence on the evolving theory of value investment. He has produced a valuable addition to any value investor's library. I'm glad I read it." —John L. Schwartz, MD, Chief Executive Officer, and Co-Founder, The Value Investing Congress "Carlisle's work succeeds on two levels: It is both a gripping account of some of the most notable episodes in the history of shareholder activism as well as an instructive guide to profiting from mean reversion and activist opportunities in today's market. Highly recommended!" —John Mihaljevic, CFA, Managing Editor, The Manual of Ideas " Deep Value is a smart, modern take on classic Benjamin Graham-style value investment. It's half history book and half quant stock screen guidebook. Learn both the history of value investing as well as a practical way to put it to work." —Mebane Faber, Chief Investment Officer and Portfolio Manager, Cambria Investment Management, LLC, and author, The Ivy Portfolio "Carlisle weaves together a rich tapestry of multi-disciplinary academic research, investment theory, and historical anecdotes to produce the must-read investment book of 2014." —Jacob L. Taylor and Lonnie J. Rush, Managing Partners of Farnam Street Investments and Visiting Professors at the UC Davis Graduate School of Management "Carlisle rigorously shows why value investing will continue to work. Deep Value is a MUST-READ for value investors." —Wesley R. Gray, PhD, Executive Managing Member, Alpha Architect, and co-author, Quantitative Value "Carlisle has persuasively rendered a thought-provoking examination of a counterintuitive investment theory. The book is as engrossing as it is useful." —Allen Benello, Chief Executive Officer, White River Partners, LP "Carlisle's book provides a wonderful combination of entertaining case studies, synthesized with results from academic research and statistical backtesting, to arrive at sometimes surprising conclusions about what works in investing, and why." —Henry Patner, Director of Research, HEG Capital

Preface ix Acknowledgments xv About the Author xvii Chapter 1 The Icahn Manifesto 1 Chapter 2 Contrarians at the Gate 19 Chapter 3 Warren Buffett: Liquidator to Operator 35 Chapter 4 The Acquirer′s Multiple 53 Chapter 5 A Clockwork Market 77 Chapter 6 Trading in Glamour: The Conglomerate Era 99 Chapter 7 Catch a Falling Knife 119 Chapter 8 The Art of the Corporate Raid 151 Chapter 9 How Hannibal Profits From His Victories 169 Chapter 10 Applied Deep Value 187 Index 217

TOBIAS E. CARLISLE is the founder and managing director of Eyquem Investment Management LLC and serves as portfolio manager of the firms fund and managed accounts. He is best known as the author of the well–regarded website greenbackd.com and as co–author of Quantitative Value: A Practitioners Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (Wiley). He has extensive experience in business valuation, portfolio management, investment research, public company corporate governance, and corporate law. Prior to founding Eyquem in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions, he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam.