Hiya Steve,
Well, I did say 'relatively' ;-) I'm not sure where I got it from; partly newspapers, possibly from "scientific" economic papers (however, those two adjectives are of course mutually exclusive in ~90 % of cases IMO, especially if they use words like 'risk adjusted'; if they blatantly say that they use EMH under 'Theory', well then what they say is false, is true...), possibly from some value guy like Klarman.
Come to think of it, I think one of the places I heard it was this Google Talk: Deep Value Investing | Tobias Carlisle | Talks at Google - YouTube
Worth a listen, and the book Acquirer's Multiple is a good read/listen too. I just love the fact that almost all value people seem to be these very humble, down to earth kinds of people.
I'm not too impressed with his real life portfolio though. Also, a problem with his (and much other) research is that much of it is based on back-testing.
What I can say is that from using the idea quite extensively during this past year, some of the worst performers when I bought them has been my best performers. On the contrary, on the few instances when I've bought something that seemed quantifiably expensive to me (say PE ~20) (remember, my avg. is just above 10), it has unfailingly been a poor investment.
I have way too short experience to draw any remotely definitive conclusions from above, but the fact that I get uncomfortable, and usually sell my overvalued stocks as soon as they fall a little, since i feel i have no MoS, enforces that result; hence, in practice, the combination of tentative results are quite clear enough for me personally. |
