"Human nature shirks from pain," says Jean-Marie Eveillard, summing up why most aren't cut out...


"Human nature shirks from pain," says Jean-Marie Eveillard, summing up why most aren't cut out for value investing. The value fund he led for 25 years blew away the indices, but many clients didn't reap the rewards - fed up with Eveillard's old economy holdings, 2/3 of AUM exited during the internet bubble. Eveillard is still finding bargains in gold miners (GDX) and Japan, but is prepared to "suffer" until Mr. Market catches on. Chart of Value (IWD) vs. Growth (IWF).

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Comments (14)
  • Chris DeMuth Jr.
    , contributor
    Comments (10210) | Send Message
     
    M. Eveillard is one of the best value investors of all time. It is stunning how much investor returns can under perform investment returns as a result of investors trying to time movement in and out of funds.
    18 Feb 2013, 09:27 AM Reply Like
  • Rinascimento
    , contributor
    Comments (1538) | Send Message
     
    I read in Hedge Fund Market Wizards that underperforming value funds of today will be outperformers of tomorrow and viceversa; this is due to the years (3-5 years) required waiting for the stocks to turn around; of course most people are impatient
    18 Feb 2013, 10:52 AM Reply Like
  • Tack
    , contributor
    Comments (16168) | Send Message
     
    A man after my own heart.

     

    Find sectors and investments nobody else likes, hates even, chose the issues with above-average yields, then, settle in and wait, and get paid for doing it.
    18 Feb 2013, 09:37 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (10210) | Send Message
     
    Exactly. Almost simple... and interesting... and lucrative...
    18 Feb 2013, 09:40 AM Reply Like
  • Uncle Pie
    , contributor
    Comments (4322) | Send Message
     
    Mr. Buffett & Co. are paying 14X EBITDA for Heinz; you can buy the major international oils at 3, 4 or 5X EBITDA and get a 5 or 6% dividend yield.
    18 Feb 2013, 09:59 AM Reply Like
  • Rinascimento
    , contributor
    Comments (1538) | Send Message
     
    Uncle Pie

     

    Yes Buffett also paid a lot for his railroad a couple years ago but is raking in money now...sometimes you got pay extra
    18 Feb 2013, 10:34 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11050) | Send Message
     
    Value investing doesn't work if you don't have patience.

     

    That is why most people don't like value investing.

     

    Momentum investing just FEELS right to most people.

     

    To bad in the long run it doesn't work though.
    18 Feb 2013, 10:47 AM Reply Like
  • RS055
    , contributor
    Comments (5266) | Send Message
     
    Absolutely right . Of course the other thing is - folks who are momentum , short term trading oriented need to be honest with themselves and aks if they are really equipped to trade against the hedge funds, computers etc etc - and what they think their edge is. The easiest edge for an average investor to grasp is a long investment horizon ( >1yr) - in which case you are not competing against 90% of the professional traders. I like to give a hypothetical example: If there was an investment that you expect will give a 100% return with a 80% probability over 3 years, but is likely to dip 50% at some point over the next year or two ( also with 80% probability) - would a typical hedge fund buy it? How would the computers trade it?
    18 Feb 2013, 11:47 AM Reply Like
  • gostockyourself
    , contributor
    Comments (101) | Send Message
     
    sophisticated hedge funds also go wayside on highly leveraged that go sour, where as the average retail investors loss is generally not a total loss or compounded total loss in a hedge funds case. hedge funds dont beat the market, they pay salaries. if any hedgefund was solely operated by a single person at a fixed middle income as a retail investor per se, im bettng 99% of them would be flops.
    18 Feb 2013, 01:59 PM Reply Like
  • johncworth
    , contributor
    Comments (439) | Send Message
     
    As a side bar, it is interesting how different the above mentioned chart looks when you change the view to "all" from the default view of 10 years. A three year longer view completely reverses the results with IWD trouncing IWF by 25%. Generally speaking of course a longer view is more statistically significant. I am not saying that is the case here, and of course I am in no way implying anything about his mastery as an investor but it just shows how easy it is to bolster your argument by data mining. Best regards, jcw
    18 Feb 2013, 10:49 AM Reply Like
  • varan
    , contributor
    Comments (5563) | Send Message
     
    I think momentum investing is better in the long run too, but people are impatient to stick to one kind or the other.

     

    Even indexing works just fine. If a couple started an IRA in 1974 and just put in the maximum allowed each year in SP500 and you assume only 1% annual dividend, their IRA would have been worth more than $1.2M today. You would have even more if you invested equal amounts in NASD and SP500 every year. Equal amounts deposited in SP500, NASD and 10 year treasuries would have been worth $1.5 M for the couple - enough for most people.

     

    So the idea is to stick to disciplined investing without fear or greed and to forget about wasting your time on financial advice in places like SA.
    18 Feb 2013, 12:34 PM Reply Like
  • Rinascimento
    , contributor
    Comments (1538) | Send Message
     
    I get a lot of free information from site like SA in the internet but I do my due diligence and educated myself about investing; I would be careful saying financial advice; I stay away from NASD and SP500 because I remember the tech bubble (NASD went down from 5,000 high) and the SP 500 with its new high, when adjusted for inflation, it is not a new high in real terms
    18 Feb 2013, 12:58 PM Reply Like
  • varan
    , contributor
    Comments (5563) | Send Message
     
    That is the point of the calculation whose results I presented above. Even with the large drawdowns in SP500 and NASD during the last decade the investment in these did pretty well (8.5% CAGR over the 40 year period without accounting for dividends). What you are exhibiting is fear. Greed and fear get you meandering from one type of investing to the other, and you lose in the long run, mostly depositing your hard earned dollars in the bank accounts of financial advisers.
    18 Feb 2013, 01:08 PM Reply Like
  • Rinascimento
    , contributor
    Comments (1538) | Send Message
     
    V
    8.5% seems pretty high for me; accordingly everybody who put money in an IRA in the 70s should be a millionaire; watch out then since Obama wants your money; I used to pay $1.25 for premium gas and now I pay over $4 and I supposed to feel rich with an 320% rise; if I were to deflate NAZ and SP 500 by 300%-400% to 1974 levels and then price them in gold then we are talking real numbers; by the way I manage my portfolio and doing good for the long term; it is better to be fearful because then you think more than be cocky
    18 Feb 2013, 03:38 PM Reply Like
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