In thinking about the presentations from the CFA Value Investing Conference held last week in New York, some prevailing ideas come to mind. First, talking about finding value is easy, actually doing it successfully is much harder. As I stated in the December 2011 newsletter, (here is the link: http://www.y-hc.com/resources/newsletters/45-2011-newsletters/242-yale-bock.html, ) usually great investing requires the ability to take some pain. In an environment where high frequency traders buy and sell stocks every 10-20 seconds, taking pain (unrealized losses) for 6 months to more than 1 year is a whole different approach. However, a key point to recognize is value and growth are tied at the hip, as Mr. Buffett says. Ultimately, great investors have the ability to buy assets at great prices and hold them until the market recognizes the asset is mispriced. How long that takes, nobody knows. Sometimes it can happen in days, other instances may take multiple years.
Another key point I think is critical is how people present has nothing to do with how substantive the points being made are. There was a presentation from a current high profile analyst which essentially was a regurgitation of his previous ten years worth of industry calls. He did it in a very flamboyant way, but the underlying material was just average. Another thought which was constantly echoed, as if we did not know, is that Wall Street is interested in fees and transactions. Yeah, really, no kidding. One only needed to go back to any kind of history of wall street, or read books from any great investing talent to know it has always been that way, probably always will be. The key point is Wall Street is there to be taken advantage of, when they misprice assets, which they do every day. It is a question of what assets do you want and what price are they being sold at, and even more important, what are you getting when you buy those assets.
In looking at recent news from the market, the more you see from rating agencies like S&P, Moody's, and Fitch, it becomes self evident the only philosophy the ratings agencies believe in is "Kicking the dog when it is down." For example, it make no sense, nor is it analytically precise, to downgrade 15 European countries at the same time. Yes, the European countries are tied together with the same currency, but conditions in Germany are not the same as those in Greece or Spain. Piling on is what the rating agencies specialize in, and it is hard to imagine a group, other than politicians, with shall we say, a lower standard with respect to how it treats its constituency.
Facebook will try and do for videos what it has done with music- http://techcrunch.com/2011/12/07/video-history-law-passes-houses-struggling-netflix-could-finally-stream-on-facebook-in-us/
Bill Ackman's J.C. Penny's takes a big piece of Martha Stewart, and it makes Macy's rethink their relationship with the cooking diva-http://dealbook.nytimes.com/2011/12/07/macys-to-review-martha-stewart-relationship/?ref=business
Living Social, a rising star and very worthy competitor to Groupon, raises some more dough before it gets ready for an IPO-http://online.wsj.com/article/SB10001424052970203413304577084803856892004.html?mod=WSJ_hp_LEFTWhatsNewsCollection
Hey- let me know your thoughts about the blog, these articles, what I have written about the market, or anything else regarding markets or business in general. I want to hear your thoughts so please post your timely comments or questions! Thanks so much for reading and hope you have a good week.
As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.