Author Topic: Career Advice - Is Value Investing Employable?  (Read 7903 times)

valueventures

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Career Advice - Is Value Investing Employable?
« on: February 26, 2017, 08:43:36 AM »
Hi All,


I am relatively new to the forums but have enjoyed reading the valuable insight shared on here. Like many of you, I am very interested in value investing and would love to work in the field someday. I am hoping you can help me understand the career prospects for value investing.


My Background

I am 23 years old and graduated from Georgetown’s McDonough School of Business last May with a degree in Finance. While I enjoyed my Georgetown experience and am very grateful to have studied there, I am somewhat disillusioned with the education I received. Around the time of junior year recruiting, while strongly considering the Wall Street route (primarily equity research), I found myself having difficulty structuring stock pitches and preparing for interviews. I stumbled upon value investing and soon read the classics (Graham, Pabrai, Klarman, etc.). It was at this moment that I realized the disconnect between value investing and modern finance teachings. I ultimately decided to go into management consulting with the idea that I would study value investing in my spare time. I have been doing this for the past six months or so, and have enjoyed my investment research far more than my consulting work.


Career Prospects

While I’m currently in management consulting, I would like to transition to some sort of investment management career that utilizes my interest in value investing. I have searched for such careers online, but have not found much that appeals to me. Most investment management jobs require more advanced credentials (MBA, CFA progression, etc.) than I have or simply rely on different investment philosophies (Wall Street short-term earnings focus) than value investing. The consensus seems to be that most of these opportunities exist in hedge funds, which recruit out of top MBAs and Wall Street banks, or require opening a fund to manage money. I realize that I am still quite young and have limited investment experience under my belt, but would appreciate if anyone could shed some light on potential careers that might interest me. On that note, I am curious if most of you are employed in this field or simply studying investing as a hobby, as I am right now. Thanks in advance for your help!


SharperDingaan

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Re: Career Advice - Is Value Investing Employable?
« Reply #1 on: February 26, 2017, 11:11:57 AM »
Recognize that if you go to 'Wall Street' - you are going to be doing sales.
If this is what you want to do; you need to be crystal clear on why you aren't in pharma or software instead (both pay better), and why you don't have a MBA in Marketing. Because your competitors - will have one.

The vast majority of 'Wall Street' business is value destructive, trading paper is also a zero sum game. Zero value creation, and the 'fee discussion' of the latest BRK letter. As a young person interested in value investing, & thereby value creation, do you really want to spend an entire career in this Sh1te? - & simply because it's perceived to be glamorous?

If you do an MBA in finance, & go up the corporate route - you will doing 'real' value investing every day.
Every time you run the numbers on whether machinery should be replaced, factory expanded, workforce in/out sourced, etc. If you're good, its also far easier to either open your own firm - or buy out a retiring partners interest in an existing firm. Brains and chutzpah are in short supply, not money.   

Its 2017, and it has almost never been easier to open your own firm. Long term - do you even really need them?
Blockchain technology is severely disrupting almost every industry it is applied to, creating opportunities, and making it even easier - if you are young, clear in what you want, and flexible.

For most people value investing is a hobby, not a career.
You don't need to be in the industry, and you're frequently better the further away you are from 'Wall Street'.

End of the day - if the salesman is as good as he says he is, how come he's still just a salesman (selling you) and not a PM?  And how come it is YOU that has the money, and NOT him? Kills the BS right there.

Of course everyone is different, & we wish you the best of luck.
Just be mindful of industry cool-aid

SD
 
   
« Last Edit: February 26, 2017, 11:20:54 AM by SharperDingaan »

valueventures

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Re: Career Advice - Is Value Investing Employable?
« Reply #2 on: February 26, 2017, 11:44:43 AM »
Hi SharperDingaan,

Thanks so much for your response! I should have been more clear in my initial post, but I am not interested in the Wall Street route. I had considered sell-side equity research during my college years but am put off by the underlying investment philosophy.

I have thought about doing an MBA in Finance or studying for the CFA. In terms of the MBA option, since I already have a BSBA in Finance, I question how useful an MBA would be from a learning perspective. I do see some merit in getting an MBA from a recruiting/networking perspective, but am not sure if this outweighs the significant costs of going back to school. I would be more inclined to study for the CFA and build credibility that way. At the same time, however, I recognize that earning certification would not necessarily make me a better investor and thus may not be the best use of time.

I have considered opening my own firm (long-term of course, since I still have much to learn), but I need to do more research on the logistics of this. I know it's fairly common for financial planners to start their own firms, so I'd imagine it's not too difficult to start your own independent advisory firm. Of course starting the firm is the easy part; it's difficult to secure a sizable client base and build capital accordingly.

SharperDingaan

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Re: Career Advice - Is Value Investing Employable?
« Reply #3 on: February 26, 2017, 12:06:18 PM »
Hi SharperDingaan,

Thanks so much for your response! I should have been more clear in my initial post, but I am not interested in the Wall Street route. I had considered sell-side equity research during my college years but am put off by the underlying investment philosophy.

I have thought about doing an MBA in Finance or studying for the CFA. In terms of the MBA option, since I already have a BSBA in Finance, I question how useful an MBA would be from a learning perspective. I do see some merit in getting an MBA from a recruiting/networking perspective, but am not sure if this outweighs the significant costs of going back to school. I would be more inclined to study for the CFA and build credibility that way. At the same time, however, I recognize that earning certification would not necessarily make me a better investor and thus may not be the best use of time.

I have considered opening my own firm (long-term of course, since I still have much to learn), but I need to do more research on the logistics of this. I know it's fairly common for financial planners to start their own firms, so I'd imagine it's not too difficult to start your own independent advisory firm. Of course starting the firm is the easy part; it's difficult to secure a sizable client base and build capital accordingly.

I would suggest that rather than do a CFA; simply work for 2-3 years in main street corporate finance, pay off some bills, and THEN make your decisions. Both co-op and online MBA programs are widely available, and nothing prevents you from doing a CFA at the same time - many people do exactly that.

For most employers what will matter is that you have an MBA, a designation, and experience with a recognized 'name'. 4-5 years of experience evidencing what you can do, is going to count more than what school (assuming its reputable) you went to. You'll also be a lot more confident in knowing whats important to you.

Good luck!

SD
   

Packer16

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Re: Career Advice - Is Value Investing Employable?
« Reply #4 on: February 26, 2017, 01:01:30 PM »
There is another way to participate beyond starting your own firm or working for another.  There are careers in business appraisal & loan underwriting that apply value concepts in a different context.  These can be nice careers in themselves but can also lead to running across interesting ideas that you can invest in the public markets also.  Also another thing you can do is network with other investors at events like the Berkshire & Fairfax annual meetings.  This will allow you to discuss ideas with others and find other information on value related careers or even if any if these fields appeals to you versus your current job.   

Working for someone else can be difficult if you are not in sync with their approach to investing. And in investing for others (your own firm) you are constrained by how the customers want to invest.  Both of these can lead to investing in the others want to, which can lead to group think & is not the best way to develop a variant perception required to outperform for the most part an efficient market. 

One alternative is to generate enough wealth in another related field, then start a fund or firm on your own where you are not dependent upon receiving investment fees to live.  Having a frugal lifestyle can help here as your income required & thus your required nest egg is small. 

You are looking at the MBA the right way.  I used it to transition from engineering to business appraisal but had a specific goal in mind beforehand & was able to get my employer at the time to incur some of the cost along with the GI bill.  If you do the MBA route, you may also want to identify financing alternatives as well as the prices are pretty high there days.

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Sionnach

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Re: Career Advice - Is Value Investing Employable?
« Reply #5 on: February 26, 2017, 01:06:42 PM »
Value ventures -

I was in your exact spot basically two years ago. This is a very interesting question. I'm not sure I have the answer yet, but I can tell you what I've learned.

I'm a value investor born and raised, but decided to go to Wall Street and do equity research out of school. Every stereotype about wall street is absolutely true: all conversation was about macro/interest rates, next quarters earnings, or the stock chart. Never did I hear the words "economic moat" or "long-term".

What Dingaan said was exactly right: its a sales role. Analyst would often downgrade a stock, knowing they would upgrade it a few weeks later, simply for the purpose of generating headlines, which means more trading from clients, which means commission $$$$$!

So basically, it was an unethical joke with no social purpose (as Dingaan said). I went into management consulting for a year and found it to be equally BS.

I'll get to the point - I honestly think active management of public equities is essentially dead. Very few can/will beat the market. So much capital is chasing so few publicly traded companies, passive is the way to go for most institutional investors. Buffett would agree (see annual letter). For you, this means there's very limited opportunities for a career in value investing in the public markets.

Here's what I think: the future of careers in value investing is in alternative assets, i.e. Real Estate, Infrastructure, Private Equity, and High Yield or Distressed Debt. There is still plenty of opportunity for active managers to add value in these areas.

I've noticed Apollo, Oaktree, and Brookfield, most notably, apply the Buffett/Graham philosophy to different areas of alternative assets. I recommend watching some Milken Institute youtube videos on the dynamics of the private equity industry. Even Buffett is getting into LBO's, whether he will admit it or not (See Kraft/Heinz).

So I would say, see what you find most interesting in alternative assets (maybe Real Estate), or find a firm you think is interesting (maybe Oaktree), and get a job there. Public Equities are not the only avenue through which you can apply the value investing philosophy.
« Last Edit: February 26, 2017, 01:11:19 PM by Sionnach »

Ballinvarosig Investors

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Re: Career Advice - Is Value Investing Employable?
« Reply #6 on: February 26, 2017, 01:27:52 PM »
Honestly? I think it's going to be very difficult for a young person with no experience to break into value investing as a career. I don't mean to be negative, but in today's climate, firms are more likely to be letting people go rather than hiring. That is the reality of the situation here in London, and I suspect the same is true in the US. I am not saying finding employment is impossible - good people will always find a way, but I think the days of ordinary MBA's just floating into the business without experience or a real passion for investing is dead (if they ever even existed!).

I think one way you can increase your chances is to maybe consider doing your own investment blog. Off the top of my head, I can think of at least a dozen people who have found gainful employment through someone discovering their blog, or else by being able to point to it as a track record. It gives you a track record, it means you can stand out, and it can also be a great way of networking and learning about the business. Of course, to be useful in finding employment, I suspect you'd want to be able to show some sort of decent returns - easier said than done in this climate.

valueventures

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Re: Career Advice - Is Value Investing Employable?
« Reply #7 on: February 26, 2017, 03:31:05 PM »
Thank you all for the helpful responses, I really appreciate it!

@Ballinvarosig Investors: Starting an investment blog is a great idea. This will help me crystallize my thoughts and allow for more interaction with other investors.

@Sionnach: Alternative investments is an avenue I've never really considered, with the exception of distressed debt and some special situations. I'll take a look at the Milken Institute and the funds you mentioned.

@Packer16: Networking with other investors makes sense, and I'll continue to do this. Since I would not open a fund/firm for at least a few years, hopefully I'd be able to generate enough wealth by then to not rely entirely on investment fees.

@SharperDingaan: Main Street corporate finance is something I've considered. I have done some research on accelerated MBA programs, but have not really looked into co-ops or online MBAs. A quick search shows that some very good schools offer online MBAs (Kelley, Tepper, Kenan-Flagler, etc.), so this is definitely worth exploring more.

winjitsu

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Re: Career Advice - Is Value Investing Employable?
« Reply #8 on: February 26, 2017, 04:14:33 PM »
Ehh -- also in the similar boat a few years ago, but looking back regret not doing Investment Banking or Equity Research. These programs are basically training for recruiting so you can jump to a HF (IBD or ER) or PE (IBD and maybe Consulting?).

Most of my friends that did these types of programs are now in top PE/HFs and yes -- you can definitely find value oriented funds (see Graham and Doddsville letters). I've been doing something a bit different (VC) and value investing on my free time, but definitely have fallen behind my friends that sucked it up and did the work for 2 years and now have transitioned to top funds.

As listed before, you can:
  • Get your CFA
  • Transition to PE/HF after a few years in consulting. Just get in touch with some recruiters.
  • Work 3-5 years and transition into a top MBA

Honestly? I think it's going to be very difficult for a young person with no experience to break into value investing as a career. I don't mean to be negative, but in today's climate, firms are more likely to be letting people go rather than hiring. That is the reality of the situation here in London, and I suspect the same is true in the US. I am not saying finding employment is impossible - good people will always find a way, but I think the days of ordinary MBA's just floating into the business without experience or a real passion for investing is dead (if they ever even existed!).

Speaking from my experience from a top school in the US, its still pretty easy to jump from a top undergrad or MBA program into ER/IBD -> HF/PE or asset management with no background. Pedigree opens a lot of doors, which I think applies to both sides of the pond.

Tech is very robust right now so a lot of smarter kids are headed to the Googles and the Amazons of the world, where the pay is similar, and the lifestyle and hours infinitely better than finance.
« Last Edit: February 26, 2017, 04:16:19 PM by winjitsu »

topofeaturellc

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Re: Career Advice - Is Value Investing Employable?
« Reply #9 on: February 28, 2017, 06:18:01 PM »
I am both a Hoya and employed as an investment person at a value focused institutional asset manager.  I would encourage you to hit up your network.