ROUGH DRAFTFinding Deep Value: An Introduction to Outperforming the Stockarket!hri"topher oonCopyright 2015 by Christopher MoonAll rights reserved, including in whole or in part in any form !O#T$#TS%refaceIntroduction%art I!hapter &: Small'cap"!hapter (: Spin'o)"!hapter *: %o"t'Reorgani+ation $,uitie"!hapter -: .ank Thrift !on/er"ion"%art II!hapter 0: !a"e Studie"!hapter 1: i"take" In/e"tor" ake!hapter 2: .u3ing and SellingAppendi4Recommended Reading 5i"tDIS!5AI$R!hispublicationcontainstheopinionsandideasoftheauthor "tisnotarecommendation to purchase or sell the securities of any of the companies orinvestmentshereindiscussed "t issoldwiththeunderstandingthat theauthor is not engaged in rendering legal, accounting, investment, or otherprofessional services#awsvary from statetostateandfederal laws mayapply to a particular transaction, and if the reader re$uires e%pert &nancial orother assistance or legal advice, a competent professional should beconsulted !heauthor cannot guaranteetheaccuracyof theinformationcontained herein !he author speci&cally disclaims any responsibility for anyliability, loss, or ris', professional or otherwise, which is incurred as aconse$uence, directly or indirectly, of the use and application of anycontents of this boo'%R$FA!$(efore beginning a )unt, it is wise to as' someone whatyou are loo'ing for before you begin loo'ing for it Poohs Little Instruction Book by *oan +owers, inspired by A A Milne!hee,cient-mar'et hypothesis ./M)0 posits that it is impossibleto1beat themar'et2 becausethee,ciency of themar'et causes e%istingshare prices toimmediately incorporate all new relevant information According to adherents of the/M), stoc's will always trade at their fair value, ma'ing it impossible for investorsto buy undervalued stoc's or sell them when they are overvalued !hese adherentsbelieveit is impossibletooutperformtheoverall mar'et throughe%pert stoc'selectionandtheonlywaypossiblefor investorstoincreasetheir returnsistoincrease the ris' " completely re3ect this convenient but na4ve de&nition of the ris'-returnrelationship "nthisboo'" will e%plainhowusingadeepvalueinvestingapproach will enable an investor to &nd opportunities that are both low in ris' andhigh in return (efore we go much further, it is important to de&ne what " mean by 1deep valueinvesting2, asmyde&nitionisli'elytobedi5erentfromothervalueinvestors "de&ne deep value as being a situation in which a security is trading at less than halfof its estimated intrinsic value and where there is a high probability the securityprice will increase by 506 or more within a 1-2 year period !his can include gardenvariety value stoc's, special situations .such as spin-o5s, mergers, and post-reorgani7ations0, and distressed securities "n this boo' " will cover deep value andspecial situations 8 twoareas that havethepotential togeneratethebiggestreturns 9istressed securities are not appropriate for individual investors .unless youare willing to $uit your day 3ob0 and will not be covered here9eep value investingis as simple as it is sophisticated More importantly, it is about a willingness to standapart from the crowd and loo' in areas other investors ignore !hisboo'ismeantforseriousinvestorswhohaveabasicunderstandingof thestoc' mar'et, en3oy the investment process, and wish to earn returns higher thantheoverall mar'et whileemployinglessris' :hilethecasestudiesonlycovercompanieslistedinthe;nitedeaders willnot master these strategies in 3ust a few hours of reading #earningthemwill re$uire time and attention