What is really challenging about value investing?

[weijian]

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.

Hi BigToe,
This is probably how the adage "It is better to be lucky than clever" comes about.

Investors new to the game, aims to be clever. Only the old fogies (me inclusive) understand that we should aim to be lucky.

[Wildreamz]

Hi BigToe,
This is probably how the adage "It is better to be lucky than clever" comes about.

Investors new to the game, aims to be clever. Only the old fogies (me inclusive) understand that we should aim to be lucky.

What are some specific strategies?

[weijian]

Hi BigToe,
This is probably how the adage "It is better to be lucky than clever" comes about.

Investors new to the game, aims to be clever. Only the old fogies (me inclusive) understand that we should aim to be lucky.

What are some specific strategies?

Hi Wildreamz,
There are no specific strategies or methods (sorry for disappointing).

So let me clarify. Again, it is about principles and I always like to quote an old (but inactive) VB KopiKat's signature:

Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks

[Wildreamz]

Hi Wildreamz,
There are no specific strategies or methods (sorry for disappointing).

So let me clarify. Again, it is about principles and I always like to quote an old (but inactive) VB KopiKat's signature:

Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks

Fortune favors the prepared. Always be on the lookout. Sounds like a sound strategy.

[Big Toe]

Luck can only bring one so far, and sometimes that is enough. Sometime it is not enough. Much like toto winners, if they are unable to earn it but able to win it by luck, it also be unlikely they are able to manage it. Competence over a lifetime is what sets investors apart and bring in wealth more consistently. There is only once where you can get rich from crypto, and the number of punters who may lose ultimately may far outnumber the earlier winners.

Back to property, with the easy monetary policies likely coming to an end, the reverse of what has happened over the past decade may come true. Maybe not in the same magnitude but effect will still be significant. Couple that with ample supply coming on board.

Value investing is the same as running a business. Usually a lot of pain and takes time. Given time, most value buys will pan out fine, some will not. So when an investor sells out within a short period 1-2 years without a good reason. (ie change of fundamentals or a dramatic increase in share price and stock realized its full potential.) The person is really just a gambler.

As per the previous post. I am not selling out the stock even after a decade because the reasons why I bought it is still valid and intact(slightly in the red now), it is in an industry where I worked in before and have good knowledge of. The business fundamentally is making excellent progress thus far and I would expect the market to realise it, and for it to be reflected in its share price. It just happen to take a really long time.

[mslee888]

Again, we have to question how long are we able or willing to wait for the so called market value to be priced in correctly..10yrs, 20yrs or even 30yrs? IMO, stocks are very few and far between to justify the hold forever maxim.

[Big Toe]

I dont give a time line for things to pan out. While it is possible to predict the outcome of certain events on a particular company, how the market view and value it is another matter. I will keep it as long as it takes provided the reasons why I bought into it is still valid. Also most of my stock holdings pays a dividend, which makes waiting more rewarding. Business may stumble(all businesses stumble at some point) within the holding period but as long as fundamentals still sound, company is making steady progress, it is fine to hold on.

With ample due dilligence done, most investments will turn out ok and do not need a very long period for value to unlock. Some will turn out bad, some will require a longer period. Different strokes for different folks, find a method that works for you.

[weijian]

Hi Big Toe,

Many years ago, I lost some money in SembMarine when O&G lost its shine after the roaring early 2010s. As I did similarly in your case, I spent quite time/effort understanding the industry and company fundamentals. I forecasted the perfect storm - 2 new shipyards (Tuas, Brazil) indicating that the capital cycle had turned, and of course the decline in oil prices (old VB greengiraffe had always warned about this). Everything was head knowledge.

At that point of time, I was slightly in the red but positive after accounting for the dividends. I could have sold out since the head was very clear about it. But endowment effect kicked in. The heart simply couldn't accept the fact that all my effort/time spent had gone to waste, as there was little to no profit been earned after all I had put in. Of course, the earlier paper gains that evaporated wasn't easy to take but after reflection, it was really this endowment effect that stopped me from doing what I must do.

Thanks for sharing intimately about some of your ideas/portfolio. All your sharing have always inspired me. I hope mine might too.

[Big Toe]

Good to hear your experience Weijin.

I knew the industry/the exact granular details/ the risks BEFORE commiting a sizable portion of my portfolio.
And I was right and spot-on but being right doesnt immediately translate to share price appreciation. The reverse can also be true, Ie Meme stocks, market can value with absolutely no logic. Not many will keep adding a position for over a dacade , this is the exception rather than the norm. Having said that, if we look at stocks in totality, it always make sense. And the overall portfolio that most of us have will likely always pan out fine.

Totally agree on the endowment effect but that has a lesser impact on stock picking. The endowment effect has a stronger impact on running a biz. Imagine building a biz from scratch, working day and night for decades and then having to take losses and close it down due to forces beyond one's control. It is the right thing to do but it can be very difficult to steer away.

[Terry]

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.

Extreme example but very normal case of long period feedback loop.

What stock is it?

Lesson taught me to not average down unplanned.

I rather write it off and buy another idea which has another 50/50 chance of "average up the profit" in this unprofitable idea.