In The Art of War, Sun Tzu makes a great deal out of concealing one’s intentions, even to the point of making it look like you are dumb.? Value investing has elements of that, though we are not trying to deceive anyone.
Most investors fall for the idea that rapidly growing companies will produce greater returns.? Sadly, that’s not true most of the time, because investors usually overpay for growth.? That leaves investors like me puttering over companies that have grown slowly and have modest valuations.? They are in boring industries: cement, insurance, shoe retailing, etc.
This is a major reason that I like value investing.? It doesn’t appeal to most people.? Buying exciting companies with great stories is a lot more fun than buying slow-growing companies at modest multiples of earnings.? Sad, but the growth investor will earn less over the long haul.
My way of managing money will go out of favor someday.? That’s the nature of money management, though for the last seven years I have been immune to troubles.? I keep applying my strategy, because over the long run it will out perform indexes.? Courage is most needed, and least available, during the bear phase.
Value tends to outperform growth in most bear market (historically) and underperform in bulls. This recent one has been an exception.
Correct me if I’m wrong, I’m going off of memory from various growth vs. value papers.
It’s not that boring! If it was just indiscriminate picking of the lowest valuations we’d all be long homebuilders and mortgage insurers.
I confess that I don’t fully understand the growth vs value debate… I have companies that would fall into both buckets, but have in common that (what I believe are) their future cash flows are overly discounted because of some kind of shorter term event (merger arbitrage, long dated assets, pessimism over industry’s prospects…etc)