Active Value Investing
Making money in the stockmarket

In his book Active Value Investing: Making money in range-bound markets, Vitaliy Katsenelson discusses how to achieve success in long-term sideways moving markets.

He believes that the U.S. stock market commenced a 'range-bound' flat trajectory in the year 2000. He argues that this trajectory will be characterised by "high volatility that is evenly distributed to the upside and downside".

To justify his claim he discusses the historical performance of the U.S. market over the last two centuries and what caused prolonged bull, bear and range-bound markets.

He investigates the emotions that characterised these markets and uses this information to argue why there is a high probabability that the U.S. market is now range-bound.

A Quality, Valuation and Growth (QVG) framework is then introduced in the second part of the book which is the basis for his approach.

As the approach suggests, he asserts that to make money in this type of market, investors need to be more proactive in their buying and selling, while not violating fundamental value investing principles.

Compared to using buy-and-hold, passsive indexing, high beta or bond-only strategies, the cost of being wrong using his suggested strategy in a range-bound market is, he argues, much lower.

I found the historical stock market data he presents to describe the three types of markets, bull, bear and range-bound convincing.

If the range-bound market stays with us for quite a while, and this could be for a decade or more if the historical data is any guide, then his strategy may well be a winner.

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