23 Sep How to Buy a Dollar for Fifty Cents: The Little Book of Value Investing
Whether you are a savvy investor or are just beginning, this is a great book to pick up. You reading this post shows me that you most likely have a keen interest in investing which leads me to believe you have been following the market lately. It’d be very hard not to given all that’s gone on. At times it seems like the market is falling apart. Many of you may know the feeling of checking one of your investments over the past couple weeks and feeling incredible excitement or total dread as you watched it’s price drop by 10 or 20% or jump by an equal amount. It really is hard to digest. This is when it’s most important to remember what value investing really is.
This little book of value helps us remember where we should and should not be focusing our investment time and effort (or stress and anxiety for that matter). I will be the first to say that with today’s incredibly volatile and potentially gut-wrenching market, I could use a call back to the basics. This short, easy read was a huge help. Simply stated, what this book and so many other value investing books will tell you is to stop spending your time worrying about all this short-term chaos. If you focus on buying great, proven businesses and keeping them for years on end, these short-term fluctuations should be nothing but excitement that your favorite businesses may be going on sale. Tell me anyone who doesn’t like it when their favorite products go on a huge sale. The stock market is no different.
The ‘Little Book’ series has been a great supplement to my ever-growing value investing education. I am always open to new thoughts and ideas and when it comes to investing, especially value investing. I am all ears to hear new explanations. What’s so nice and refreshing about value investing is that no matter who describes it, the same few simple ideas come up. On one hand you could say that once you have read one book on the subject, you have read it all, but it’s not until you really dig into the subtleties of one’s approach that you start to see what makes great value investors. For most of you, this material is nothing too new, but some nice reinforcement is important from time to time.
Christopher Browne has had a very successful career that dates back to the days when Ben Graham and Warren Buffett were running their own money and their own funds. His stories and experiences with the investment greats of the past century go a long way in hammering home his points. You will find a new spin on all the classic fundamentals of margin of safety, Mr. Market, focusing on earnings and profitability over sexiness and popularity, only buying when prices are cheap, and most importantly, keeping a good head and sound discipline when investing the way in which it was meant to be done.
Value investing happens to be a great passion of mine, which is why my partner and I founded our own value fund, Cumbre Capital Partners. Even with all we have learned, done and experienced over the years, I can’t tell you the importance of continuing to reinforce the basic fundamentals as Browne touches upon here. More than anything, value investing is a huge test of will and discipline. It’s easy to buy and sell whatever is ‘hot’ or ‘sexy’ at the time, but it is entirely different to have the conviction and discipline to stand behind an investment and approach, when everyone else is telling you why you’re wrong and why your ideas will fail. It still blows me away why the most proven investment approach of all time is still so rarely adopted in practice but I think the answer comes down to one word, discipline.
And it’s no coincidence that this is one word that the most successful people in the world have in common. Whether the space be investing, personal coaching, relationships, professional sports, the arts or anything else, rock solid determination is what has lead to success beyond what most thought was possible. As you journey down the road less traveled to success, at times it will seem like everyone wants you to fail or has lost hope in you, and it is then when you find out what true success is made of. This is one of the reasons I love value investing. It is the discipline and ability to swim against the current with complete certainty, despite what others tell you.
Now more than ever is this the case in a value investor’s career. We are being severely tested. If any of you search for articles of Warren Buffett in the late 1990’s, you would have seen reports indicating ‘Warren has lost his touch’ and that ‘he doesn’t understand this technology stuff’. What did he do in response? He kept doing exactly what he’d done for past 50 years while he watched the dot com bubble burst in everyone’s face. And look at him now. His value approach has put him in a better place than anyone in today’s daunting market, so remember that as these volatile times test your conviction. And no matter your experience level, do not be afraid to pick up a new book to reinforce what you have already learned so many times in the past. It may be just what you need to remind you of the incredible opportunity these times are presenting. If nothing else, hopefully it will get you to shut off Google Finance for a few hours or a few weeks and to sit tight with the wonderful businesses you probably already own. After all, time is the dear friend of the great business. See you in the market.
-Reading for Your Success
“A collection of businesses bought at excellent prices is not less a long-term asset than a piece of real estate and should be treated the same way.”
-Christopher H. Browne
“Most of men’s problems arise from their inability to sit quietly and alone.”