CAIA Level I: An Introduction to Core Topics in Alternative Investments Book

Bland, obvious and somewhat outdated. Disappointing given Warren Buffet's recommendation.

I was hoping for some good ideas on identifying growth franchises that can be backed for long periods of time - most likely the common ground that Buffet finds with Phil Fisher, but instead I found a lot of obvious, MBA-style wisdom, short of real insight. Very little of what is presented is verifiable or backed up with data. The book is particularly dangerous as the basis of an investment manifesto for investors with less savvy than Fisher as today's most esteemed companies frequently trade at high valuations, leading to their systematic underperformance as the natural forces of competition and mean reversion do their work to undermine the market's unrealistic expectations (see David Dremen's Contrarian Investment Strategies for research backing this statement). Fisher had the experience and judgement to counteract these forces but most investors do not.

Additionally, the valuation methodologies employed by the author are relatively simplistic and rely on a good deal of qualitative judgement. This may sound OK in theory but countless studies have shown otherwise, that because of innate biases, qualitative judgements tend to lead to underperformance over large samples of investors - bar a few seasoned veterans such as Warren Buffet and Peter Lynch). The main problem is that investors lack the discipline to remain unaffected by the cycles of euphoria and panic that characterise markets. The only proven way to instill this discipline is to base decisions on consistent valuation criteria - i.e. one cannot get away from the numbers.

Fisher lays out a generic framework that would be a great scorecard for a business awards committee, but would be an unsatisfactory set of guidelines for long term investing success - particularly given the lack of attention on valuation. Anyone who disagrees with this statement should read Dremen's Contrarian Investment Strategies. Clearly most of Fisher's value-add came from industry scuttlebutt and qualitative judgement - unfortunately not something one can learn much about from a book.

Common Stocks is not in the same league as Ben Graham's, The Intelligent Investor, which in my view can be employed by the average investor improve his long-term performance (and is backed by substantial research by the author and subsequent studies). For help on the qualitative aspects of investing one could do worse than reading the Buffet annual letters to shareholders.

The introduction by Ken Fisher, Phil's son, must be one of the most arrogant and self-promoting forwards ever created and really puts a bad taste in the mouth at the outset..