Thomas:
My bet, though, is that outside of this megabubble/bust period, that one may well sacrifice more profit this way than one saves.
My experience is that the opposite is true. Bear in mind that while mega-bubbles may be rare, mini-bubbles, sector-bubbles, and company-specific-bubbles are not.
Point being, right now I have no real evidence whether any of these techniques is even a candidate.
Understood. I believe that you don't have such evidence. I think you are right to base your decision on what you know or understand.
Just because something has a lot of idiosyncratic or random behavior doesn't mean that one can't try to find ways to explain part of the variation and thus gain some predictive advantage. In fact, that is exactly what the Gorilla Game is all about -- find companies that have certain characteristics and they will display certain behaviors that are different from companies as a whole, behaviors that are advantageous to the investor.
Sure. And that is what has been behind the various valuation studies, and the various applications.
ll I am looking for is a way to put a bit of substance under some of the valuation ideas. FCF, for example, proposes a method that seems to make a certain amount of internal sense and it certain takes into account more issues than some simple method do. But, how does it really work in practice?
But you've already rejected the experiences of those who use variations of it. That is how it works in practice. Even if you could conduct the kind of test you want, odds are you couldn't replicate the test in your own investing. You've also rejected the academic testing. That is how it works hypothetically. :-)
have to wait five years to see how the test came out. I'm more impatient than that!
So hurry up and build us that time machine.
- Pirah |
