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Strategy

Deep Value Bible

Finding Value Where Others Refuse to Look

Section I — What Deep Value Investing Really Is

Deep value investing is not traditional value investing.

It is not about buying "good companies" at modest discounts, nor is it about precision valuation models that assume stable futures. Deep value investing operates where uncertainty is extreme, information is scarce, and consensus has already priced in failure.

In these environments, prices are not wrong by a few percent — they can be wrong by multiples.

Deep value focuses on assets that are:

The objective is not perfection.

The objective is mispriced survival.

Section II — Why Deep Value Exists

Markets are efficient where:

Markets are inefficient where:

Large institutions are structurally unable to operate in these areas.

Retail investors — independent, flexible, and unconstrained — are not.

This is where deep value opportunities live: below consensus, not above it.

"The consensus view is already built into the price." — Ray Dalio

Deep value investing begins where consensus ends.

Section III — Redefining "Value"

Traditional value investing relies on estimating intrinsic value and buying at a discount.

Deep value rejects false precision.

In many distressed or ignored companies:

In these cases, debating whether fair value is $10 or $14 is irrelevant.

What matters is asymmetry:

This philosophy was articulated clearly by Keith Gill, who emphasized that valuation accuracy matters far less than understanding how wrong the market might be.

Section IV — Asymmetric Risk: The Core Advantage

Asymmetric Risk Profile

Deep value investing is not about avoiding risk.

It is about structuring risk so it works in your favor.

The ideal deep value setup looks like this:

These opportunities often exist near:

"We are card counters at the blackjack table. And we're going to turn the odds on the casino." — Billy Beane

When perception shifts from "dead" to "surviving", repricing can be violent and rapid.

Section V — Survival First: Credit Over Valuation

In deep value, credit analysis matters more than valuation.

The primary question is not:

"Is this company cheap?"

It is:

"Can this company survive long enough for the market to be wrong?"

Key survival indicators include:

A company issues bonds to raise money. Those bonds are given a rating based on how safe they are. The safer they are, the lower their yield. Higher yields imply higher risk.

Two places to find useful credit information:

Key Insight

Companies priced for bankruptcy that merely survive often deliver the highest returns — not because they thrive, but because expectations were catastrophically low.

Section VI — Insider Behavior as Signal

One of the strongest non-quantitative signals in deep value investing is clustered insider buying.

Insiders may sell for many reasons:

They buy for one reason only:

They believe the stock is materially undervalued.

Multiple executives buying meaningful amounts of stock within a short time window is a powerful indicator that internal expectations diverge from market pricing.

You can check insider transactions using OpenInsider: openinsider.com

In neglected and distressed companies, insider conviction often precedes major repricing.

Section VII — Cycles, Narratives, and Human Error

Markets consistently extrapolate trends linearly.

This creates opportunity.

Many deep value investments exist in:

Human psychology struggles with non-linear outcomes.

Deep value investing exploits this weakness.

Section VIII — Liquidity, Coverage, and Opportunity

Deep value thrives where:

One research platform for reviewing financial ratios and fundamentals is Ticker Terminal: tickerterminal.com

These conditions are uncomfortable — but essential.

Low liquidity and low attention allow prices to drift far from reality.

They also prevent large capital from arbitraging inefficiencies away.

Key Insight

Complexity, illiquidity, and obscurity are features, not flaws.

Section IX — Positioning and Portfolio Construction

Portfolio Construction

Deep value portfolios are not concentrated on certainty.

They are diversified across uncertain but asymmetric bets.

Typical construction principles:

One multi-bagger can outweigh numerous small losses.

This is not traditional diversification — it is asymmetric diversification.

Section X — Equity First, Options Selectively

Equity ownership is the foundation of deep value investing.

Options may be used selectively when:

However, options introduce additional risk layers.

In most deep value situations, shares provide superior risk-adjusted exposure.

Leverage is a tool — not a requirement.

Section XI — Why This Strategy Persists

Deep value investing remains effective because it is:

These characteristics deter institutions and discourage most individuals.

The inefficiency persists precisely because participation is limited.

Section XII — The Cost of Entry

Deep value investing is not glamorous.

The work involves:

The reward is not consistency — it is magnitude.

Closing Perspective

Deep value investing is a discipline of independence.

It requires:

It is not about being right often.

It is about being paid disproportionately when you are.

"You can't beat the Yankees by trying to be the Yankees." — Billy Beane