"VALUE INVESTING WITH THE MASTERS by Kirk Kazanjian"
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I read this one after the biography of Warren Buffett, the world's most famous value investor, and I'm sure glad I did.
This value investing book consists of interviews with 20 different mutual fund managers and investors known for being "value" investors
In today's investment world, value investing generally means that they buy companies they consider greatly under priced, on the assumption that in the long run the market will go up to the true value.
If forced to put my money under the control of a value mutual fund manager or its "opposite" -- a growth mutual fund manager, I'd certainly choose the one investing for value.
However, I think both paradigms are flawed, and this book illustrates my belief.
See, all these masters revere the two most famous investors for value, Benjamin Graham and Warren Buffett
Most of them gave lip service to the idea of looking upon stock investing as buying into a good business, not as manipulating pieces of paper.
Yet most all of them said that they sold stock when its market price reached their estimate of its fair value.
Say what?
How many people buy a business because they can get it cheap, hold it a few years and then sell because they found a buyer willing to pay the current market price which is now higher than what they originally paid?
Nobody -- that'd be crazy.
In fact, if you think about it, that's simply the "growth" method of determining stock market value -- but starting with a cheap stock price instead of an expensive stock price.
Whether you originally pay a little or a lot for a stock, you're still holding it just because you think you'll get someone to pay you more in the future. So one way or the other, you believe its current market price is below the present value of what its future market price will eventually become.
It's not treating the stock as shares of a profitable business even if your holding period is longer than the average growth stock fund.
These guys all claim they revere Warren Buffett -- but none of them holds a good stock "forever" (Buffett's favorite holding period)
So the entire "controversy" between growth and value investment strategies is whether cheap stocks or expensive stocks are more likely to go up in market price.
Nobody buys a business because they think its assets will go up in value in the coming years. You buy a business because it's either making a profit or you believe you can change it so it does make a profit.
That is, you buy a business with the expectation of making money on a continuous basis
You want a cash flow of profits.
If you really understand that you should treat stock investing as a business, you want a cash flow from your business -- quarterly dividend checks!
And as long as you keep receiving those quarterly dividend checks, you won't sell those shares of stock. No matter how high the market price.
I wish there was a mutual fund manager who really did invest in stock like it was a business
But both the growth and value fund managers would hate them.
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