Comment by RandomThoughts3
2 months ago
Technically, value investing still work.
The key tenant of value investing is that there exist companies which based on their financial metrics are fundamentally under valued by the market (in opposition to what market price efficiency predicts).
From there, an insane market should provide you with even more opportunities to value invest.
> an insane market should provide you with even more opportunities to value invest
This seems like a uniquely bad time to make this sort of argument.
There are many old tools for insane markets to perpetuate themselves that are recently stronger (revolving doors between industry/government and other garden variety corruption; all the monopolies we have to tolerate out of fear, convenience or greed; "too big to fail" and trends towards globalism in general). There are also several relatively new tools (algorithmic price-fixing so that industry "competitors" can now collude forever with impunity; total masks-off no-holds-barred corruption where the unelected/unqualified are simply appointed to positions of power regardless of clear conflicts of interest). Add to this what others have observed re: meme-stocks, huge moves based on tweets or concerted disinformation. Or there's the cooked books on a massive scale with Theranos or SBF or the out of control corporate fraud with VW's dieselgate or Boeing's 737 Max, or .. or .. pick your own recent scandal.
Value investing seems to need reliable information from somewhere to make informed decisions, but where is that going to come from? Investment in individual companies rather than in diversified aggregates seems nuts if the financial markets are going to be as "post truth" as the political world.
> Value investing seems to need reliable information from somewhere to make informed decisions, but where is that going to come from?
Value investment is entirely based on financial fundamentals. You don’t need magic information. That’s the whole point. For something that old, people like to use the world but seem blissfully unaware of what it actually is. Graham’s books are available pretty much everywhere.
The whole point of the thing is that fundamentals actually matter and markets misprice because they rely on other less sound things. That’s why it seems even more relevant in a post truth market.
None of the companies you listed would have qualified as sound for value investing by the way.
Nitpick: a tenet is a foundational principle or belief; a tenant is someone who pays rent. (Which I suppose could be used as a metaphor for a dividend-paying stock, but.)
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I thought I was going out of my way to not be insulting. It has absolutely nothing to do with feeling superior. It has everything to do with the fact that I frequently encounter people who surprisingly don't seem to know things like this, and I wish for them to learn so they can avoid the mistake in the future.
I did not engage in the discussion because I had nothing further to contribute to it. I recognized that, and contributed what I could entirely orthogonal to that.