Author Topic: I have given up value investing  (Read 17198 times)


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Re: I have given up value investing
« Reply #10 on: January 16, 2019, 10:34:57 AM »
At the end of the day you need to find a strategy that lets you sleep well at night (and have great relationships). You may find that what you have learned in the past will help you at some point in the future. Best of luck on your journey :-)


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Re: I have given up value investing
« Reply #11 on: January 16, 2019, 12:55:11 PM »
Very honest muscle man.

Personally I'm more concerned with valuing a great business and waiting for the price to fall because of some event rather than "cigar butts". And even then i won't buy until the discount to my valuation is at least 100%. I don't see any point risking any money in equity for only 10 to 20 pct. It has to be asymmetric.

This all makes me sleep well at night as I don't worry about the business. And if the price falls but nothing has changed, well I might buy more.

If I manage my cash flow too then I should be able to cope with stock price fluctuations.

And concentration doesn't worry me, especially if the risk is asymmetric. Hence my gse position...
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Re: I have given up value investing
« Reply #12 on: January 16, 2019, 01:09:50 PM »
I view investing like mix martial arts.  To get good, you need to take bits from everywhere to eventually create your own style.  Value investing is just one art form.  With top UFC fighters, most are well rounded and are exceptional in one-two things.  Like Jon Jones with his length and wrestling, he's also good in other aspects of the game. 

So just being good with value investing is not good enough nowadays, in the long run anyways.  The game is competitive nowadays so we need to constantly learn from other styles to create our own. 

Also, everyone peaks.  Like in sports, there are people who figured out an inefficiency and make it to the top.  Eventually, others figure it out.  Like Conor McGregor with his striking.  Other fighters learned if you make him tired then his edge goes away. 

I think investing is like the same.  Traditional value investing might still work, but long term its edge isn't so black and white.  So it's up to us to add to the depths that is value investing. 
« Last Edit: January 16, 2019, 01:11:49 PM by berkshire101 »


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Re: I have given up value investing
« Reply #13 on: January 16, 2019, 01:37:13 PM »
If I may give my two cents, these reflections about your temperament may mean you would be better suited risking a smaller % of your money in the stock market, and perhaps should own more bonds.

I totally get where you're coming from. Real estate has been a lot easier for me emotionally, so I've been moving more cash to that area.


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Re: I have given up value investing
« Reply #14 on: January 16, 2019, 02:04:01 PM »
Don't take this the wrong way but I've long thought you might be a great candidate for an index product, like a low ER balanced or target date fund (or like a low fee RIA).  You could also consider whether being a "dividend-growth" type investor might help you with some of the behavioral issues we all face.  Many of the other options are inferior to what you've been doing and you will probably lose more money (e.g., growth or momentum/technical investing or "trading").
« Last Edit: January 16, 2019, 02:06:21 PM by CorpRaider »


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Re: I have given up value investing
« Reply #15 on: January 16, 2019, 02:57:05 PM »
Dividend growth investing here.  I am down to 2 stocks in my portfolio that aren't growing their dividends annually  These two pay high dividends, they just aren't going to grow.  As soon as I can find a couple of more dividend growers At A Reasonable Price then I will get out of the last couple. 

The exception I suppose is BAM, my largest single holding.  It grows its dividend but is more like Berk. and uses more of its retained cash flow in a productive manner. 

GARP tending toward value


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Re: I have given up value investing
« Reply #16 on: January 16, 2019, 04:05:11 PM »
Hi muscleman,
I enjoyed exchanging info with you in the last few months and commend you on this conclusion as it helps compensate the survivorship bias that is implicit on this Board.
You often finished your posts with questions and I will do the same in this post:
Are you switching from value investing to investing in values?
Good luck to you

CorpRaider's post caused me to reflect on the relevance and timing of some comments and morphed into the following exercise:

                                                -capacity to deliver excess returns                 -incapacity to deliver excess returns

-indexer                                               A=waste of talent                                        C=realistic assessment

-aiming for excess returns                    B=investing nirvana                                     D=over-confidence issue

I assume that the B group is over-represented on this Board but would like to submit that, in the real world out there, about 85 to 90% of investors aiming for excess returns do not achieve their objective, making the C category perhaps a better option in some instances.

Interesting to note that "Jack" Bogle (RIP) started out being ridiculed (by some) and ended up as a hero (for most).
Time is your friend if you end up in the right category.


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Re: I have given up value investing
« Reply #17 on: January 16, 2019, 06:50:56 PM »
Admire the way you are intellectually honest and looking at performance in a rational manner. It is a rare quality and I think would serve you very well in whatever you choose to do.

I think Gregmal hit it in the head. The problems you mentioned have little to do with value investing. Even if you take up indexing you would face the same problems. I think with indexing, it might be even more of a problem. When you take an individual company, you might have some insight, right or wrong about that company, which might give you some confidence in your decision making. With indexing you have less insight and the things that are going to determine the value tend to be macro variables. Which are even more uncertain which basically causes investors to let their emotions dictate.

The very first thing you need to check is your behavior when an investment goes down 50% or more in value after you bought it upon no news.

1) If you can honestly see yourself saying "Meh!" and increasing the allocation, then you are a viable candidate for investing. You can think more about how to go about addressing the behavioral issues.

2) If that is going to cause you to lose sleep, then you need to think of something very different. Something where you would have little insight into the investments. Use DFA funds  which slice and dice into a dozens of index funds with an advisor to boot who can talk you down from making radical changes. Or buy  Target date funds, which hide all the fluctuations due to them being a mix of stocks and bonds, etc which reduces volatility. End result is you see your overall portfolio value change only modestly. This way you can stick with an allocation for the long term.


The fundamental algorithm of life: repeat what works. –Charlie Munger


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Re: I have given up value investing
« Reply #18 on: January 16, 2019, 07:29:21 PM »
Thank you Muscleman for your post.

Like yourself, I started this value investing journey in 2010. After 8, going on 9 years, hacking away at this hobby with no formal training, I would have to also admit that I have not come close to outperforming the index. And reading the thread "CoBF members 2018 returns" were, also made me reflect on what am I doing here.

Perhaps it is a bit of rationalization on my part, but I wouldn't consider all those years wasted time. It has forced me to learn a whole lot of things that should have learned two decades prior. Subjects such behavioral finance, decision-making, leadership, mental models, psychology, innovation in addition to learning a bit more about my personal biases and tendencies. These things have added significant non-monetary value to my personal and (non-finance) work life. I would consider the money that I lost or could have made indexing, the cost of this education.

Not being in the finance field, does give a few advantages to the outsiders like me. I allows me to play a different game where poor performance does not lead to career risk. What I realized over the years, is that what people like me need to do, is to find companies that they really like, do enough homework (and keep doing it) to convince yourself that you can hold these businesses (and their management) for very long periods (10+ years). Maybe there were be a few duds, maybe there will be a few winners. We all hear about the cases of know nothing savers buying stocks that they only recognize because of their brands, and hold them for multi-decades, and produce extraordinary results.  I figure that if I find opportunities with founders that are local to my geography, figure out their businesses, rule out why I shouldn't fall in love with them, and hold them "forever". I would expect a reasonable outcome.

Don't know if this is a crazy strategy, I'll let everyone know in about 40 years.



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Re: I have given up value investing
« Reply #19 on: January 16, 2019, 07:42:29 PM »
I've been hedging against my own stupidity by putting any retirement contributions into index funds.  ::)