All an investor can do is follow a consistently disciplined and rigorous approach; over time the returns will come
The trick of successful investors is to sell when they want to, not when they have to.
Value investors have to be patient and disciplined, but what I really think is you need not to be greedy. If you're greedy and you leverage, you blow up. Almost every financial blow up is because of leverage.
To a value investor, investments come in three varieties: undervalued at one price, fairly valued at another price, and overvalued at still some higher price. The goal is to buy the first, avoid the second, and sell the third.
The way to maximize outcome is to focus on the process.
Value investors should completely exit a security by the time it reaches full value; owning overvalued securities is the realm of speculators.
If you can remember that stocks aren't pieces of paper that gyrate all the time --they are fractional interests in businesses -- it all makes sense.
The cost of performing well in bad times can be relative underperformance in good times.
Risk is not inherent in an investment; it is always relative to the price paid. Uncertainty is not the same as risk. Indeed, when great uncertainty - such as in the fall of 2008 - drives securities prices to especially low levels, they often become less risky investments.
It's awful to have a depression, but it's a great thing to have a depression mentality because it means that we are not speculating, we are not living beyond our means, we don't quit our job to take a big risk because we know we might not get another job. There is something stable about a country, a society built on those values.
As Buffett has often observed, value investing is not a concept that can be learned and gradually applied over time. It is either absorbed and adopted at once, or it is never truly learned.
It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the stock market or economy. Value investing, the strategy of buying stocks at an appreciable discount from the value of the underlying businesses, is one strategy that provides a road map to successfully navigate not only through good times but also through turmoil.
Value investing is predicated on the efficient market hypothesis being wrong.
In a rising market, everyone makes money and a value philosophy is unnecessary. But because there is no certain way to predict what the market will do, one must follow a value philosophy at all times.
If only one word is to be used to describe what Baupost does, that word should be: 'Mispricing'. We look for mispricing due to over-reaction.
In reality, no one knows what the market will do; trying to predict it is a waste of time, and investing based upon that prediction is a speculative undertaking.
A simple rule applies: if you don't quickly comprehend what a company is doing, then management probably doesn't either.
Targeting investment returns leads investors to focus on potential upside rather on downside risk ... rather than targeting a desired rate of return, even an eminently reasonable one, investors should target risk.
Warren Buffett is right when he says you should invest as if the market is going to be closed for the next five years. The fundamental principles of value investing, if they make sense to you, can allow you to survive and prosper when everyone else is rudderless. We have a proven map with which to navigate. It sounds kind of crazy, but in times of turmoil in the market. I’ve felt a sort of serenity in knowing that if I’ve checked and rechecked my work, one plus one still equals two regardless of where a stock trades right after I buy it.
The inability to hold cash and the pressure to be fully invested at all times meant that when the plug was pulled out of the tub, all boats dropped as the water rushed down the drain.
Selling, in particular, can be a challenge; many investors are tempted to become more optimistic when a security is performing well. This temptation must be resisted; tax considerations aside, when a security reaches full valuation, there is no longer a reason to own it.
The avoidance of loss is the surest way to ensure a profitable outcome.
While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.
When all feels calm and prices surge, the markets may feel safe; but, in fact, they are dangerous because few investors are focusing on risk.
In a crisis, stocks of financial companies are great investments, because the tide is bound to turn. Massive losses on bad loans and soured investments are irrelevant to value; improving trends and future prospects are what matter, regardless of whether profits will have to be used to cover loan losses and equity shortfalls for years to come.
