Unfortunately, the term 'value investor' is mostly misunderstood. 'Business owner' is a better label for a sensible form of investing that emphasizes what-to-own before getting to what-to-pay.
Good read. Essentially this is what investing means. In today's time, some are calling "placing a buy or sell order on the broker's website or app as investing", an example how loosely can words be used. Same is true for 'value investing' as pointed out.
What you write makes sense, and way you write is great. Thank You for sharing your thoughts
Brilliant article! Even Buffett recently mentioned he is 'business-picker' vs a 'stock-picker'. I am going through the dilemma if I should pivot from 'buy quality cos. for indefinite period' to 'buy statistically cheap stocks - sell when price meets intrinsic value - rinse and repeat'. This article restored my faith. :)
I recently started writing about my analysis here - https://freecashflowfordummies.substack.com/ (shameless plug).
PS: +10000 for the Meenakshi Ammal reference. Ded.
Thank you for the fantastic article! This is exactly what value is. To be honest, it could even be argued that there is no “value” or “growth,” but simply “intelligent investing” and everything else that isn’t that.
If anyone asks me what does “value” mean, this would 100% be one of the articles I’d point to. Very well written -- thank you!
Enjoyed the article, and it just makes me realize that getting better at the investing game is a herculean task. There is so much noise not only about value investing, but about almost everything. To top it, there is a lot of overconfidence oozing from almost all participants, like they know what is happening and what will happen. And to make it even more overwhelming, is to become self aware of all the biases running my decision making process or someone else's. Now I can related to Charlie Munger when he says "Investing wasn't supposed to be easy".
Great essay. Never thought about value investing becoming cheapness investing but I had started seeing useless numbers when seeing businesses to identify if it was cheap and the focus went away from the business.Taking some learning and focusing on the business more now.
This is a FREE master class ... Just in case one must be reminded! Print (or Save), Read, Repeat Read !
Awesome. Thanks a ton.
Excellent Anand. People often ignore simple ideas at one extreme and try to oversimplify complex things on the other extreme. To think like an owner of business is indeed a very simple and powerful idea. To save by underspending our incomes and invest the savings to wisely own parts of businesses is another simple and powerful idea. By doing so we reach financially independent, wealthy, and live peaceful life.
One of your best Anand 👏👏👏 keep up the good work 👍
You are one of my favourite echo chambers, always reassuring.
We could complicate by saying that we should also measure the business performance against our hypothetical assumptions - but it's just not a good gauge considering the randomness in business and life in general.
Value investing principles i.e. low PE multiples doesn’t always work in Indian markets. Most often, companies have low multiples for a reason. Agree that having a business owner mindset would help in generating better PF returns
Hi, good post. But, have you ever compared your returns to a hypothetical factor pf where in the factor is quality + value. The style you have discussed reflects quality + value imo. As "qualitative" investors, we have the tendency to ignore "quantitative" ideas like factors - but they are very powerful. If your returns dont beat quality + value factor returns then essentially you are running a strategy which any computer can replicate without charging 2/20 by buying a basket of quality + value factor cos. (you aren't generating alpha). The reason why investors like Klarman are so impressive is because their style can't be encapsulated into a factor, so even if they are buying kachra cos, if they beat value factor pf - it is very impressive.