A Quote by Whitney Tilson
Small-company stocks, like any asset class, can get picked over from time to time, but there are fundamental reasons why diligently mining them with an eye for unrecognised value can get market-beating returns.
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Value investing doesn't always work. The market doesn't always agree with you. Over time, value is roughly the way the market prices stocks, but over the short term, which sometimes can be as long as two or three years, there are periods when it doesn't work. And that is a very good thing. The fact that our value approach doesn't work over periods of time is precisely the reason why it continues to work over the long term.
The word passive does a disservice to investors considering their options. Indexing provides an effective means of owning the market and allows investors to participate in the returns of a basket of stocks. The basket of stocks changes over time as stocks are added or removed based on its rules.
Over the long term, despite significant drops from time to time, stocks (especially an intelligently selected stock portfolio) will be one of your best investment options. The trick is to GET to the long term. Think in terms of 5 years, 10 years and longer. Do your planning and asset allocation ahead of time. Choose a portion of your assets to invest in the stock market - and stick with it! Yes, the bad times will come, but over the truly long term, the good times will win out - and I hope the lessons from 2008 will help get you there to enjoy them.
We already have an annual wealth tax on homes, the major asset of the middle class. It's called the property tax. Why not a small annual tax on the value of stocks and bonds, the major assets of the wealthy?
When you buy enough stocks to give you control of a target company, that's called mergers and acquisitions or corporate raiding. Hedge funds have been doing this, as well as corporate financial managers. With borrowed money you can take over or raid a foreign company too. So, you're having a monopolistic consolidation process that's pushed up the market, because in order to buy a company or arrange a merger, you have to offer more than the going stock-market price. You have to convince existing holders of a stock to sell out to you by paying them more than they'd otherwise get.
It's hard to find ideas that aren't picked over and harder to get real returns and differentiate yourself. We are entering a new environment. The days of big returns are gone.
I think Pete did have a hard time as a kid with his appearance. But don't all kids have a hard time? God, I had a hard time, too. I was little with bow legs and rickets. I used to get picked on like everybody used to get picked on.
Just as outright euphoria is often a sign of a market top, fear is for sure a sign of a market bottom. Time and time again, in every market cycle I have witnessed, the extremes of emotion always appear, even among experienced investors. When the world wants to buy only treasury bills, you can almost close your eys and get long stocks.
Pilot season in L.A. is just this blood bath. They make so many pilots, and such a small percentage are picked up. And then if you are picked up, there are so many variables. You have to get a good time slot, and you have to get promoted. And then you have to thrive in that time slot.
I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time.
Market prices for stocks fluctuate at great amplitudes around intrinsic value but, over the long term, intrinsic value is virtually always reflected at some point in market price.
In the stock market (as in much of life), the beginning of wisdom is admitting your ignorance. One of the many things you cannot know about stocks is exactly when they will up or go down. Over the long term, stocks generally rise at a nice pace. History shows they double in value every seven years or so. But in the short term, stocks are just plain wild. Over periods of days, weeks and months, no one has any idea what they will do. Still, nearly all investors think they are smart enough to divine such short-term movements. This hubris frequently gets them into trouble.
Use Time. Make it easy. Get your money to work for you. The key is to get in the market, as it is not about timing the market, but time in the market that matters.
Unlike cheap stocks, inexpensive asset classes have a lower chance of big drawdowns (broad asset classes don't go to zero) and a higher probability of average or better returns.
Since I suffered the injury on company time, why shouldn't I also be able to get surgery and do recovery on company time?
My net worth is the market value of holdings less the tax payable upon sale. The liability is just as real as the asset unless the value of the asset declines (ouch), the asset is given away (no comment), or I die with it. The latter course of action would appear to at least border on a Pyrrhic victory.
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