MIKE MOO: Every business has ups and downs, triumphs and screw-ups, is at one time adored and another hated. As value investors we tend to look for events that trigger overreactions that put decent companies into favorable price range. If this were Dec 1974, Aug 1982, or Oct 1987, virtually all companies would be in that favorable range. But after an historic bull run that has valuations of many companies discounting Nirvana, it takes a negative event to drive the price to bargain range.
If you had bought Coke in the early 80's after the New Coke fiasco [arguably the dumbest marketing move ever made because it put at risk what would come to be recognized as the most valuable brand franchise in the world], you would have made out rather well. If you had bought in mid 98, when everyone knew it was the best managed company on the planet, you'd have taken a bath.
Your point about catching investment salmonella with bargain buys is well taken, though, because the internet has the potential to permanently alter business models. Thus, in previously stable areas where you could have bought on a bad quarter, it's critical to ask if some discontinuous innovation might be about to take over the market.
An important key to being successful in investing is to choose a style that fits. I like to shop for bargains at the grocery store and the stock market so value investing suits me fine, but others, not keen on bargain hunting, will be more successful buying growth or momentum. Do what fits you.
bob |
