The Curse of the Value Investor Returns

The Curse of the Value Investor Returns

GST Impact

Decades of market data, media reports, analyst reports, and more players in the financial arena has led to a major transformation in the investment field. That transformation can be summed up in a single word: activity. To many investors, inactivity is viewed as possessing inferior investment knowledge. To the value investor, inactivity is bliss. To the value investor, activity or inactivity is determined by one principle factor: valuation.

The time to be active was October 2008, despite the fact that the stock market was ultimately headed lower. Further activity was warranted over the subsequent 6 months.Today, the value investor is confronted with the preverbial curse: very little value in the market despite a seemingly unending risein the S&P 500.

However, sometimes the best investment idea is no investment at all. As the market continues to remain strong, the pool of quality investment opportunities naturally declines. An investor used to action willcome to realize that today'sinvestingenvironment, while appearing friendly to stock prices, may turn out to be his worst enemy. On the other hand, the value-seeking investor understands that short periods of excellent buying opportunities are often followed by longer periods of inactivity. I currently find the market in this longer period.

French mathematician Blaise Pascal observed "all men's miseries derive from not being able to sit in a quiet room alone." Indeed this observation hits the bulls eye when it comes to reasons why many investors make mistakes in investing. Emotion, and the need for immediate active results, often lend themselves to poor investment decisions. Looking back at 2008 and the many investors who failed to make it alive, investors will benefit from the quip, "to finish first, you must first finish."

Indeed while the best gains are off the table for now, sitting still does not necessarily mean being 100% in cash although if thats what it takes, so be it. I'm not inclined to think we are anywhere near that point of 100% cash as certain sectors, like those within the agricultural industry, continue to offer tremendous value on a multi-year basis. However, the time to be 100% invested was a little over a year ago and may not come back for some time.

So, while triple-digit gains may be gone for know, investors can be patient with names like Vodafone a global wireless communications provider. The shares yield nearly 6% and the company owns 45% of Verizon Wireless, the largest wireless provider in the U.S. Currently, Vodafone gets no dividend from VW because its majority owner Verizon Communications is requiring VW to use its cash to pay down debt it owes. Yet, once this debt is repaid later this year, an opportunity exists for Vodafone to begin receiving a nice infusion of dividend cash payments.

While investment opportunities can always be found, the key is tounderstand when the opportunities are ample, and when the well is dry. This understanding comes from an understanding of fundamental valuation. Further, suchunderstanding has nothing to do with market timing. Every rationalinvestor should expect temporary periods where his portfolio will show a decline, as volatilityexists in stock markets.For the value-seeking investor, buying at absolute bottoms and selling at the top is not the key to investment success. Instead its buying assets below intrinsic value, and when no such assets can be bought, then buy nothing

 

ABOUT AUTHOR

Niveza Editorial Desk : We are a team of stock market nerds trying to stay ahead of the herd. We spend our grey cells everyday to a pave a smooth road for our clients in the shaky world of stock market. While tracking the mood swings of the market we bring our clients the most rewarding deals.

LEAVE A COMMENT

RECOMMENDED READING

2019 Elections And Indian Stock Market: History, Relation, And Impacts

General Election 2019 is the thing now every investor is waiting for. But why the elections are considered to be much more important for stock markets. Why every tom, dick and harry associated with the stock market is saying elections as a key
Read More>>

Markets Getting Ready For A Rally

Our Analysis This week market consolidated between 10,400 to 10,650 due to lack of domestic positive news & due to technical resistance. Though the fall of crude oil price below $65/ ba
Read More>>

Free Share Market Tips Today: Stop & Read Before You Invest In Stocks

Various popular stock market news portals and TV channels discuss trending stocks and provide free share market tips based on technical charts and often without in-depth research. Our research desk analyses these trending stock market tips and pro
Read More>>

Best Stocks To Buy For Long Term Investment

What is the best way to invest in equity? If you ask this question to any market expert you will get a single line answer - long-term investment. There is no doubt that long-term investment is the best route to exploit the maximum growth of a busi
Read More>>

5 Best Shares To Buy Today For Short Term

The general rule of thumb is that shares bought for less than one-year holding duration are considered as short-term shares. Here are the 5 best shares to buy today for short term duration of around six months. These top shares ca
Read More>>