The simple fact of the matter, it seems, is that the market only cares about momentum. The mo-mo is with the Nifties and the Nets, and it's against the values. For short- and mid-term traders, it looks like value is dead, dead, dead -- unless you happen to time the upturn perfectly (e.g., FLC in the low 5s).
Will this situation change? Eventually, I suppose it will; but it's hard to tell when that might possibly be. What's the incentive for a switch away from the mo-mos? What fund managers are going to turn away from the money-making mo-mos and toward the dead values, when they have to hit their numbers every quarter, month, week? What short-term hype players are going to risk money in a dead sector, waiting for a turnaround? In the near future, at least, I find it hard to tell where the incentive to invest in value will come from.
I'm very comfortable as a value investor, because I truly do believe that value will continue to pay off over the long run. But I've had to change my mindset for shorter-term trading: the object isn't so much to identify the best companies, the yet-to-be-discovered gems, but rather to identify the best stocks, those that are blessed with volatility and liquidity. This really grates on me, because I truly enjoy reading SEC filings and finding promising, undervalued companies like FLYR. But the reality of today's market says, quite plainly, that this isn't the best approach to short-term trading; and for as much satisfaction as there is about being right about a company, the objective is to make money, and to do that you have to be right about a stock.
Please excuse the rambling. I'm really just trying to come to terms with a phenomenon -- extreme market irrationality -- that is hard for me to accept. |
