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Value investing is failing me

Value investing

For a while now, I have been trying to apply sound value investing approaches by buying quality companies when they fall below intrinsic value with a good margin of safety. The truth is so far I have only managed to acquire one stock with this approach. It is tough… so tough that many value investors are simply waiting for a crash. So far that is not playing too well.

Now had I simply just opened initially a small (2-5%) position in each of the stocks I monitor ignoring the ticker price and simply average down when they went down by a margin, I would have been making a decent return instead of idling on cash. This lead me to question whether as a young investor I am over-thinking this process and getting too rigorous about the process, to a point that the research process is becoming injurious to my investing opportunities.

I am curious whether you folks encounter the same challenge and how you proceed to rationalize your next steps.

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  • You need to understand that in a low interest rate environment growth > value. This is why stocks at large have been well above the long term average PE since around 2013. There was not any real rotation into value until last year as interest rates started to resemble something normal.

    At the waxing stage of the longest bull market in history fueled by ZIRP for most of it, no you will not find any real decent value plays. That’s just logical.

    Also I believe the days of valuation by PE and/or book value is a rather dead concept nowadays.

  • I studied this for my thesis and found value investing according to price earnings and price book no longer works. Maybe the edge has been found? If too many investors know and invest according to those ratios, thee success is lower.

    Value investing according to EBIT/EV worked though

    (UK FTSE ALL SHARE, 2007-2018)

  • IMHO this market is valuing growth over value. Both are important. Important to know which stocks are winning the popularity contest in the sector you’re investing in.

  • I’m a value investor too, but I don’t wait when a specific ticker gets cheap, I buy every month the best valued stock or ETF (in my estimation) that I can find, with a global outlook. Since around last October it’s mostly been MU.

    I sometimes wonder if I’m too eager to buy stocks (I never hold a cash position, but actually have a small low cost investment loan), but it’s been working pretty well.

  • How long a time are we talking about? Part of value investing is patience. Wait for your pitch. With the US market near all time highs, looking overseas might be useful.

    Another common pitfall are value traps. Cyclical stocks are the most common. Buying say auto stocks at low PE at peak auto sales tends to be a bad idea.

    Walgreens was discussed as a value pick a few weeks ago. Turns out there was good reason the stock was low.

    Lastly, you made one poor pick in a short amount of time, and say that the technique is failing. That doesn’t sound like a patient person. Maybe value investing is the wrong style for you.

  • Stocks aren’t necessarily a good VALUE right now, and also weren’t back in Sept ‘18. That’s why Warren Buffett is having a hard time trying to find great deals so he can spend his cash in a smart way. At some point you just have to find companies that are profitable and growing and invest regularly.

    And speaking of, Berkshire is a really good deal right now in my opinion. People aren’t taking Apple’s recent runup into consideration like they should. Anything below $200 is a solid buy for BRK.B, but the current price of $205 is good enough for a long term hold. Let Buffett be the one to make the good value buys on your behalf and just hold Berkshire.

  • When did you start investing? The mini bear market 3-4 months back was a great time to pick up good companies cheap! I personally bought some shares of msft at $95 and aapl at $144.

  • It’s though to find great value pickups in the current market. But that’s no problem at all. Buffet himself is also holding 100b+ in cash right now. It’s part of value investing.

    However there still many great undervalued companies out there. Espacially if you look outside of the U.S. or at smaller caped companies.

  • I mentioned a value play in VICL. It can seem like value investing is failing you but sit tight. The business cycle is close to coming to an end. Cash is going to be very important when earnings decelerate. We need to be patient and just researching the stocks we want in our portfolios and at what prices we will buy to get the return we’re looking for. The market is a bit whacky here but chasing stocks here will likely give you lower than desired returns. Don’t catch the FOMO

  • Yeah, you’re not understanding value investing correctly. Graham says that even if you buy companies below their intrinsic value, their price could sit there for a very long time. If it were easy to just buy a cheap company and than make an instant profit, everyone would be doing it.

    What you need is a catalyst. Graham gives one catalyst being that large companies have the capital and market dominance to try new things. Good example is Walmart and their turnaround in e-commerce. Another is McDonalds and their turnaround in same store sales with new food items.

    Also, value investing only works if you have a lot of money. Making 30% off of millions will get you richer than 30% off of $5,000. If you’re only using your own money, you will be a millionaire at the age of 170 yrs old.

  • Value is important when it comes to assets vs liabilities, revenues vs cost of goods.

    But I suggest you take it to the next level and also learn if there is a viable strategy in motion. An undervalued company that has a good strategy is gold. Take AMD for example. Was undervalued at 2.69 at what I bought at – It had a strategy with the new CEO of focusing on CPU’s and video game consoles only + RYZEN lineup.
    Boom- rocket ship.
    Target – Bought at 68.49 – undervalued – strategy of remodeling stores, SHIPT acquisition, competing Amazon through omnichannel (pickup, curbside, delivery), new brands in every category, new concentrated managers to hire sectors within the business (groceries, electronics, clothes), seizing market share with failing companies (ToysRus, babiesrus).

    Find another one like that .

  • You’ll be very happy with yourself when a panic hits and you have a cash pile to scoop up the bargains. There are a few out there still from the December fiasco but you gotta dig deep, as it was still only a blip in the big picture. The biggest challenge with active investing IMO is how much dry powder is optimal to hold. You don’t want to be the value guy who is 100% invested when 2008 hits.

  • In my opinion you are over thinking, not sure how young you are but what I’ve done is just split holding between QQQ and VTI. Just add more position once they fall, time in market>

  • Why do you need more then one stock? If you found a good company that you understood and fell below your intrinsic vale estimate by a significant margin why didn’t you just invest all you could into that one stock? There aren’t many opportunities but when they come around you have to seize them.


    But on a broader point your right – it can be tough to find undervalued companies, especially in this logic defying bull market. Try looking for companies at 52 week lows, preferably small caps, and in the meantime put your cash in bonds (There are ways to put money in bond index’s for free). DO NOT get ‘antsy’ and start lowering your standards for investing like how you said, and here’s why – Would you rather sit on lots of cash and not invest for a little while or would you rather sit on lots of stocks and after lose lots of money after a little while.

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