DaveinHackensack

What's Wrong with Today's Value Investing?

GreenAB,

Good point about multiple contraction. You may be interested in reading what Vitaliy Katsenelson has written about this phenomena during secular range-bound markets. You can check my site, where I've posted about this, or go directly to his site by googling his name.

What's Wrong with Today's Value Investing?

Marc,

I think the problem with a lot of value investors is that they are so focussed on bottom-up analysis (often based on trailing data) that they ignore the relevant macro trends.

Here's one example: a lot of value investors piggybacked on Warren Buffett's holding USG over the last year or two when they saw it had dropped in price. What they didn't consider was the relevant macro trend: in this case, the real estate and residential construction bust. You don't have to have slogged through Security Analysis to know that a company that manufactures sheet rock is not going to have great earnings during a real estate bust; you just have to pay attention to the relevant macro trends and use some common sense.

This is what has separated Ken Heebner from the pack in recent years.