Author Topic: Why I Am Not A Value Investor  (Read 19560 times)

ajc

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Why I Am Not A Value Investor
« on: October 09, 2013, 03:09:10 PM »
Saw this the other day and thought maybe it was worth posting. Also, the potential it had for kicking off a relatively lively discussion admittedly seemed almost too good to turn down.
 
Not sure I agree with a fair amount of what he's saying, but at the same time I also think there are probably a handful of cognitive biases his approach inadvertently stops him from succumbing to.
To me, it seems like sub-consciously it has slightly more in common with 'real' value investing than a few other styles I'm aware of (if that doesn't sound dogmatic itself).

Disclosure: This is not a plug for the book that's featured by the way, I just thought the blog was sort of interesting. I suppose I'll say however, that in my opinion it does look like it might turn out to be somewhat readable.



Why I Am Not A Value Investor

The header is a playful provocation: in truth I am probably closer to a value investor than other type. But I place little credence on the historical superiority of value investing (which has faltered in recent years anyway), and I have little sense of affiliation or identity as a value investor.  Itís not quite that I donít want to be a member of any club which will have me; rather itís that that Iím nervous about a club which is now so crowded and where all the members think alike.

The problem with value investing is that it is now a popular and widely followed investment philosophy.  Analytical techniques which historically worked well when used by a small minority of investors will work less well as more investors use them.  This is inherent to the nature of markets: a matter of arithmetic, not opinion...


http://guythomas.org.uk/blog/

« Last Edit: October 09, 2013, 04:53:40 PM by ajc »


T-bone1

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Re: Why I Am Not A Value Investor
« Reply #1 on: October 09, 2013, 03:23:39 PM »
After getting over my initial shock at seeing the title of this thread, I have to say this sounds interesting. 

Price to book investing and even finding stocks via screening has gotten much more crowded and returns are probably no longer adequate.  Most of the great value investments I have seen in the las year or two have been due to an analyst (or manager) finding some insight into the business, rather than into the balance sheet.

Of course you could argue that Munger took Buffett in this direction long ago.  Understanding the competitive advantages of Starbucks or American Express after the crash (I did neither) would have been a lot more profitable - and less work - than most of the singles, doubles and triples I have discovered (along with plenty of strikes).

In any case, I look forward to this discussion.

Thanks for posting!

T-bone1

Palantir

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Re: Why I Am Not A Value Investor
« Reply #2 on: October 09, 2013, 03:38:23 PM »
I think value investing is essentially a defensive strategy, not necessarily designed to produce great returns, but to avoid major mistakes, and I don't believe it is inherently superior to other styles, although there are some talented value investors.

Sort of like in soccer how some managers (Mourinho, Herrera, Benitez) prefer counterattacking strategies, while others (Guardiola, Wenger, Van Gaal) build their games around highly attacking philosophies.
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matjone

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Re: Why I Am Not A Value Investor
« Reply #3 on: October 09, 2013, 03:39:55 PM »
So  basic value investing won't work anymore?  If so, I am probably screwed because I am too dumb to do anything else.
When stocks are high, money rates rising, and business prosperous, at least half a given fund should be placed in short-term bonds. - Philip Carret

premfan

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Re: Why I Am Not A Value Investor
« Reply #4 on: October 09, 2013, 03:49:32 PM »
I think value investing is essentially a defensive strategy, not necessarily designed to produce great returns, but to avoid major mistakes, and I don't believe it is inherently superior to other styles, although there are some talented value investors.

Sort of like in soccer how some managers (Mourinho, Herrera, Benitez) prefer counterattacking strategies, while others (Guardiola, Wenger, Van Gaal) build their games around highly attacking philosophies.

Your right its not superior. Value investing is a philosophy that reasonates with investors that have a certain temperament. The great investors trust there gut. Its the intuition that creates the win. Developing intuition is superior to any style or investing philosophy.

JBird

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Re: Why I Am Not A Value Investor
« Reply #5 on: October 09, 2013, 03:49:59 PM »
Quote
The problem with value investing is that it is now a popular and widely followed investment philosophy.

Can someone please say this at the AGM? Buffett would laugh out loud if he heard this.

Woman and wine, games and deceit, make the wealth small and the wants great. - Ben Franklin

siddharth18

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Re: Why I Am Not A Value Investor
« Reply #6 on: October 09, 2013, 03:53:27 PM »
So  basic value investing won't work anymore?  If so, I am probably screwed because I am too dumb to do anything else.

+1

valueInv

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Re: Why I Am Not A Value Investor
« Reply #7 on: October 09, 2013, 03:57:11 PM »
I think value investing is essentially a defensive strategy, not necessarily designed to produce great returns, but to avoid major mistakes, and I don't believe it is inherently superior to other styles, although there are some talented value investors.

Sort of like in soccer how some managers (Mourinho, Herrera, Benitez) prefer counterattacking strategies, while others (Guardiola, Wenger, Van Gaal) build their games around highly attacking philosophies.

Your right its not superior. Value investing is a philosophy that reasonates with investors that have a certain temperament. The great investors trust there gut. Its the intuition that creates the win. Developing intuition is superior to any style or investing philosophy.

Intuition? Boy, if only I could invest with intuition, I wouldn't have to do any hard work or analysis  ;D

premfan

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Re: Why I Am Not A Value Investor
« Reply #8 on: October 09, 2013, 04:10:16 PM »
I think value investing is essentially a defensive strategy, not necessarily designed to produce great returns, but to avoid major mistakes, and I don't believe it is inherently superior to other styles, although there are some talented value investors.

Sort of like in soccer how some managers (Mourinho, Herrera, Benitez) prefer counterattacking strategies, while others (Guardiola, Wenger, Van Gaal) build their games around highly attacking philosophies.

Your right its not superior. Value investing is a philosophy that reasonates with investors that have a certain temperament. The great investors trust there gut. Its the intuition that creates the win. Developing intuition is superior to any style or investing philosophy.

Intuition? Boy, if only I could invest with intuition, I wouldn't have to do any hard work or analysis  ;D

Intuition is the secret sauce, the xfactor, what separates the truly great.  Intuition is illogical in nature. I know a lot of real estate investors that have amazing intuition. Hard work and analysis is logical . Mix it with a splash of intuition you win.

merkhet

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Re: Why I Am Not A Value Investor
« Reply #9 on: October 09, 2013, 04:16:29 PM »

Quote

The problem with value investing is that it is now a popular and widely followed investment philosophy.


Can someone please say this at the AGM? Buffett would laugh out loud if he heard this.


+1


Intuition is the secret sauce, the xfactor, what separates the truly great.  Intuition is illogical in nature. I know a lot of real estate investors that have amazing intuition. Hard work and analysis is logical . Mix it with a splash of intuition you win.


I think that what strikes many people as intuition is merely the clustering of previous thought and experience so that to both the internal and external audience, it arises as if it was a eureka moment.  Hard work and analysis is present even if it does not seem like it.