Book Club: The Little Book of Bull's Eye Investing

I read John Mauldin's The Little Book of Bull's Eye Investing over holiday break and found it a great intro to value investing for those looking to build long term portfolios. Mauldin examines studies on historic PE ratios in bull and bear markets to determine the average bear market lasts about 17 years. Mauldin believes our current bear market still has about 5 years and at least 1 recession left to go before we are in for another bull market led by PE expansion, not necessarily earnings growth. Mauldin expects GDP growth to be in the 1.5% range for the next several years, and uses studies to conclude that earnings growth cannot exceed GDP growth. Therefore, his argument is PE expansion is the only driving force for stock prices increasing in the near future and this is not likely as the current market PE of

Mauldin also argues against investing in established tech companies as their high growth periods are far behind them. He believes investors should focus in emerging technologies like biotech, wireless communication, fusion power (or some other new energy source), robotics and artificial intelligence.

Mauldin's key points to investing in the next five years are:

- Find value stocks (Graham number)
- If you invest in bonds, short term only (1-5 year maturity).
- Start an investment club to spread around research responsibilities (wingSTIR note: Highly Recommended!)
- Stay away from established technology stocks and look for value in mid cap companies in emerging technology sectors.

Books Mauldin recommends
Stock Cycles by Michael Alexander
The Roaring 2000s by Harry Dent
Irrational Exuberance by Robert Shiller
The Fourth Turning by Neil Howe
Yes, You Can Time the Market! by Ben Stein
Triumph of the Optimists by Elroy Dimson, Paul Marsh, Mike Staunton
Fooled by Randomness by Nassim Nicholas Taleb
Security Analysis by Benjamin Graham and David Dodd
The Intelligent Investor by Benjamin Graham
The Millionaire Next Door by William D. Danko
The E-Myth by Michael Gerber

Books Mauldin Avoids
Stocks for the Long Run by Jeremy Siegel