JOSHUA PEARL has served as a Managing Director at Brahman Capital, a long/short equity asset manager. He focuses on public equity investments and special situations utilizing a fundamentals-based approach. Previously, he structured high yield financings, leveraged buyouts, and restructurings as a Director at UBS Investment Bank. Prior to UBS, he worked at Moelis & Company and Deutsche Bank. He received his BS in Business from Indiana University's Kelley School of Business. He is also the co-author of Investment Banking: Valuation, LBOs, M&A, and IPOs. JOSHUA ROSENBAUM is a Managing Director and Head of the Industrials & Diversified Services Group at RBC Capital Markets. He originates, structures, and advises on M&A, corporate finance, and capital markets transactions. Previously, he worked at UBS Investment Bank and the International Finance Corporation, the direct investment division of the World Bank. He received his AB from Harvard and his MBA with Baker Scholar honors from Harvard Business School. He is also the co-author of Investment Banking: Valuation, LBOs, M&A, and IPOs.

About the Authors ix

Foreword by Howard Marks xv

Acknowledgments xix

Disclaimer xxv

Introduction 1

Chapter One Step I: Idea Generation 19

Screens 22

Bottom-Up Approach 24

Top-Down Approach 59

Chapter Two Step II: Identifying the Best Ideas 71

Idea Review Framework 73

Investment Thesis 77

Business Overview 82

Management 91

Risks & Considerations 96

Financials & Valuation 99

Chapter Three Step III: Business & Financial Due Diligence 121

Business Due Diligence 123

Financial Due Diligence 148

Chapter Four Step IV: Valuation & Catalysts 171

Valuation 173

Market and Intrinsic Valuation 174

Buyout Valuation 194

Catalysts 206

Setting the Price Target 227

Chapter Five Step V: Investment Decision & Portfolio Management 233

Making the Investment Decision 236

Monitor the Investment 243

Portfolio Construction 250

Portfolio & Risk Management 263

Post-Mortem: Delphi Automotive 279

Bibliography & Recommended Reading 289

Praise for The Little Book of Investing Like the Pros

"Simply put, I have never before seen a book that provides the same complete and thoughtful orientation to the process of investing. The Little Book is clear, logical and well-organized, a concise survey course in what investors need to know. It starts at the beginning, with identifying candidates for investment and screening them for potential."
--Foreword by Howard Marks, Co-Chairman and Co-Founder, Oaktree Capital Management

"Contrary to what many believe, investing need not be a random walk. For would-be stock pickers who want to beat the market, The Little Book of Investing Like the Pros articulates a process which will greatly assist them in achieving that goal."
--Stanley Druckenmiller, Founder & CIO, Duquesne Family Office

"Pearl and Rosenbaum have written a book that any serious investor, or anyone aspiring to be one, will want to read. Investing in stocks sounds easy. It's not. Emotion surrounding equities and money too often impedes clear and methodical thinking, which is the key to long-term success in the stock market. This volume provides a framework that will help you stay on track."
--David Abrams, Founder, Abrams Capital Management

"The two Joshes have produced a succinct investment guide. They have distilled some of the most complex investing concepts into an easily digestible and accessible framework."
--Nelson Peltz, CEO & Founding Partner, Trian Fund Management

"This book is a valuable guide for investors learning to select securities and build portfolios in a thoughtful, professional manner. The authors provide an easy-to-follow approach which begins with idea generation and moves through the critical steps for analyzing company performance, security valuation, and potential risks."
--Abby Joseph Cohen, CFA, Advisory Director and Senior Investment Strategist, Goldman Sachs

"Josh was among the first investors outside of the cable universe to understand and believe in what we could do with Charter. The tools and techniques contained in this book were crucial in uncovering this story, which continues to unfold."
--Thomas Rutledge, Chairman & CEO, Charter Communications

"When we did our roadshow, many investors felt our story was too good to be true. Those that didn't invest missed out on a tremendous ride. This book may have helped them make a different decision."
--Rodney O'Neal, Retired President CEO, Delphi Automotive