What is really challenging about value investing?

(28-01-2019, 11:38 AM)specuvestor Wrote: If the question is "What is really challenging about value investing", then I think it is 1) patience and 2) conviction

1) You can have the mind of Buffett but does not have his patience then it is not going to work. Even Elliot's Argentina bonds reap full benefit only after more than 10 years. What is your timeline? Different timeline will give very different results even if the analysis of the same stock is the same

2) Conviction comes from how much one knows or study the company. If it is just by hearsay even in VB forum, which is already miles ahead in terms of noise filtering, then conviction level is low when noises comes in. Conviction does not mean stubborness though. Like Keynes said" When the facts change, I change my mind. What do you do, sir?" Conviction based on facts will change when facts changed, but one has to know the facts first.

I agree. I think conviction is a result of expertise, and expertise comes from years of honing skills to be an 'authority' in a particular field. For example, I know of a person who retired early after investing big in SSDs, this person spent his entire career in the tech industry and worked for a fortune 500 company for many years. So its not surprising that he knew that industry better than anyone else and bet big when opportunity came.

(26-01-2019, 03:19 PM)Kaimin Wrote:

(26-01-2019, 11:41 AM)karlmarx Wrote: The greatest challenge of value investing is that there are (at least presently) no more obvious value.

The Singapore market has become very efficient in pricing. And it seems to be increasingly efficient as we move further from the last major market panic. Emerging Asian markets are also very efficient as most of the players are foreign investment managers with well-funded research teams and capital.

..........And personally I think conservative investment is also not difficult here. You could put your money into stalwarts growing at 6-7% per annum including dividends like the banks, or REITs yielding 5% dividends and small DPU growth. These are well capitalised, well run corporations with a history of consistent profits and dividends (our Singaporean banks in particular did very well in the 2008 recession. They had little exposure to risky MBS derivatives and needed no bailout).

Howard Marks wrote in his book that the goal in investing isn’t to earn average returns - it's to do better than average. 

There are quite a no. of blogs / online media discussing SG REITs / high div yield stocks which seem to be popular investment vehicles in SG. Instead of doing that, isn't it a more efficient way to invest in an index(granted there is Forex involved) and maybe even more profitable compared to say Banks/REITS(risk of rights issues) and we can use the time saved(e.g. reading the ARs) for other things ?

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What Is the Average Annual Return for the S&P 500?
https://www.investopedia.com/ask/answers...sp-500.asp

Vanguard S&P 500 (VOO): Historical Returns
http://www.lazyportfolioetf.com/etf/vang...nd%20yield.

https://finance.yahoo.com/quote/SPY/performance/

After re-reading the thread and re-considering the question, and with the benefit of experience, I am now convinced that Specuvestor's response is the most correct answer.

The amazing gains by tech companies, Crypto, and NFT may have led some to abandon traditional asset classes and old economy stocks for the new and fancy. It is hard to not be distracted for a prolonged period of time! Probably some of the new and fancy assets will be really profitable in the long run, but probably not all old economy stocks are in terminal decline as well.

Thanks K, S and all valuebuddies.

I am reading my study notes collected by reading books and internet eg. valuebuddies and I would like to share one story.

Steven Covey - Evaluating strategy -> "Wrong Forest".

This is in written in my own words.

It's a hot and humid day and we are in the middle of Amazon.

Everyone is united and everyone is very focus on their tasks - cutting trees, clearing shrubs and making way for a straight path into the forest.

These are the advanced party who pave the way so that the rest of the main body can manoeuvre at the fastest possible speed.

"Stop!", someone shouted.

This irritated the team leader and he shout back.
"No, push forward, focus on your task, push forward."

"Stop, stop, stop!", someone shouted again.

The team leader shouted back and say, "Listen everyone, push forward, focus and push forward."

"Stop!", again someone cried.

Now, the team leader is really upset and before he could says anything.

"Wrong Forest!", shouted from the look up who was checking the direction at the tree top.

So, for a million $$$, how could we know that the stock that we pick, deserved our patient and conviction?

As a hint, I would like to share the youtube that I watched yesterday - thanks to Mr 1M65.  For those valuebuddies who don't have patient to watch, skip to 1 hour 28 min 42 sec and listen to Sam Rhee (Endowus):


Gratitude and have a nice weekend.

For most experienced investors, a tailwind is certainly welcomed than not - As the saying goes, it is better to be lucky than good.

The key message is that value or growth works because it doesn't work all the time. OPMIs have to equip ourselves with all the possible tools to build our swiss army knife - Don't hold onto the past that doesn't work, accept that the Market is more often right than us and learn to discard our narrow beliefs/biases.

Is a new golden age of value coming?

Value stocks have outperformed for the last 12 months, or even longer and value investors are finally getting optimistic again. After a decade when seemingly only momentum strategies would work, are we heading into a new golden age for value investing?

https://klementoninvesting.substack.com/...lue-coming

One of the main challenges that any value investor will face is controlling one's own emotions - Greed, FOMO, Anxiety.

Value Investing is a time-honoured approach that has allowed many to compound wealth, but it takes deep conviction about a companies' fundamentals to silence those fears and emotions when the market turns volatile.

the challenge i find is the time frame to validate your thesis and strategy long term.
usully the best opportunity is bought at market bottom cycle and sell on top cycle.

the market say SPY takes 10 years to complete 1 cycle.
personally i see my usually stocks complete 1 cycle in 5 to 6 years from bottom to top.
though by luck i had some bought and complete the cycle in 2 years.

the feedback loop is too long.

(06-02-2023, 07:57 PM)Terry Wrote: the challenge i find is the time frame to validate your thesis and strategy long term.
usully the best opportunity is bought at market bottom cycle and sell on top cycle.

the market say SPY takes 10 years to complete 1 cycle.
personally i see my usually stocks complete 1 cycle in 5 to 6 years from bottom to top.
though by luck i had some bought and complete the cycle in 2 years.

the feedback loop is too long.

Wouldn't quarterly business performance (profit/revenue/cash flow growth etc) validate the thesis?

I held one stock. Which is a long term core holding. (not sharing, not local)
Fundamentally good business, very honest competent management.
Bought way undervalued 12-13 years ago and I know one day it will narrow the gap given time.
Was down perhaps 60-70% at its lowest from my purchase price. 12 years later, it is still underwater but my losses narrowed significantly. Its subsidiary is also publicly traded and is trading more than twice the value of the parent. And the parent/holding co. is profitable and have good assets but viewed as negative equity.
Think it will need another 5-10 years to see some light, may take longer or shorter, I wouldnt know.

To be fair this is one of the more extreme example and it takes a long time for value to be unlocked due to the nature of the business. Still in the red and still buying on dips at the moment. Need very strong conviction. One of my 3 core holdings. Most investment or businesses take time, and in the process of getting there, there will be a lot of pain.

Side track a bit, speaking of investment. On the residential property side of things, defied common business logic as it had been great for the past decade during the low interest rate era and boosted by the covid supply delays and pent up demand. Every property investor is now wealthy and every agent is now a wealth creation expert. Luck or knowledge? Did the property investors analyse as much as I did when making a investment decision, I would think 99.99% did not. And 99.99% did better than me, at least compared to one of my stock investment. I work a lot harder to earn a lot lesser.

(08-02-2023, 01:05 PM)Big Toe Wrote: Side track a bit, speaking of investment. On the residential property side of things, defied common business logic as it had been great for the past decade during the low interest rate era and boosted by the covid supply delays and pent up demand. Every property investor is now wealthy and every agent is now a wealth creation expert. Luck or knowledge? Did the property investors analyse as much as I did when making a investment decision, I would think 99.99% did not. And 99.99% did better than me, at least compared to one of my stock investment. I work a lot harder to earn a lot lesser.

I think we cannot compare property investment here with stocks investing. Our property supply is controlled by our gov via land sales. And if the land sale bid by the developers is deemed too low, the sale will be rejected.