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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (16339)	2/3/2003 11:36:06 AM
From: Bob Rudd	Read Replies (1) of 78519

Perhaps because of exposure to Buffett's take on it, I tend to view EMH based research as not adding much value. Most of the time the conclusions are obvious or irrelevant. One of the best attempts to answer "The big investing puzzle' was 'What works on Wall Street" which ranked P/B in the middle in terms of risk adjusted returns. Stock buybacks lower book as do charges, yet the former can imply prosperity and rational allocation of capital and the latter may drive the price below intrinsic value. I think most of us on this thread are aware of the 'science' aspect that low P/B, PE, PEG and various other ratio's are usually less likely to have priced in expectations unlikely to be met. An interesting question is whether one should blindly follow a low multiple strategy or look deeper at qualitative issues and/or red flags that might indicate that the apparently 'attractive' low multiple is anything but. Most of us seem to go well beyond simplistically buying low multiples...so in the final analysis it comes down to a combination of methodology and judgement...both of which are imperfect and will continue to be so.

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