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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (15126)8/11/2002 9:40:13 AM
From: Seeker of Truth  Read Replies (1) of 79047
 
Hello Paul,
The whole matter of investment strategy is clouded by the fact(I consider it a fact) that a number of strategies "work", i.e. in the long run one makes SOME money using them. The problem then is "which is the best strategy?" Some possible ones are:
1. Buying stocks that are very unpopular as shown by the high short ratio.but which are selling at a big discount to the book value. This book value must have real value; it mustn't be some specialized machinery.
2. Buying stocks which are selling at a low P/E and have a high return on both assets and equity. The companies should have low debt.
3. Buying stocks which are on Value LIne's most timely list and also have a very high rating on the Investor's Business Daily's numbers.
4. Buying Berkshire Hathaway and forgetting about the market.
5. Buying stocks which have a control over some technology that everybody must use, e.g. MSFT, INTC.
6. Buying stocks of companies like Walmart and Wells Fargo Bank and Toyota, which are consistently well managed, when they are at a P/E which is relatively low for them.
7. Avoiding stocks and buying income real estate with low leverage.
8. Buying stocks that have a "moat", a nontechnological semimonopoly such as the Washington Post or eBay or MCO.
I suspect that any one of these strategies will bring in some return on the money invested, over the long run. No doubt there are other reasonably successful strategies. Now indisputably the most successful passive investor of all time is Warren Buffett. Lately he has become quite an active investor since he actively manages the insurance businesses of Berkshire Hathaway. It seems to me that he uses methods 2 and 8. Using method 2 he bought See's candies and Shaw's carpets. I assume KO belongs to strategy 8.
So after all which is the best? I submit that the best is the one that leaves the investor with the greatest serenity. In other words our strategy must convince ourselves. That's the most important point. If it doesn't do so then there is something wrong right at the start. So the answer to the question which is the best will vary among people just for this reason. What's best for you may not be best for me. I like 6,7 and 8. If I had once paid 10% down on some hot property and lost everything then I wouldn't like 7. etc.
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