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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: paulelgin who wrote (51812)	6/30/2013 12:46:21 AM
From: Jurgis Bekepuris	3 Recommendations Recommended By E_K_S sjemmeri Spekulatius Read Replies (1) \| Respond to of 78774

You are throwing together at least three different things: standards of absolute value There is nothing that has absolute value. For a person who needs money tomorrow, any stock has only the current value in the market. For person who can hold investment for 10 years, it may hold very different value. If investment has yield of 4% today and US treasure rates spike to 4% tomorrow, that investment just lost a lot of value. Arguing differently is just not understanding what "relative" and "absolute" means. these standards any less effective in their evaluation of potential investments and margin of safety Name at least one such standard. You quoted Klarman at length. He talks about liquidation value and private market value and yield compared to US treasury rates. None of these are standards of absolute value. They are all comparing value against some number that you imagine to be stable, but which isn't. If a company is liquidating and credit crunch hits, you know as well as I do that it might be lucky to receive maybe 1/2 of the pre-credit-crunch liquidation value. we as value investors must be cognizant of the downside risks before we commit capital. Sure we should. Nobody argues against it. Following rigorous standards such as those posited by Klarman and Graham & Dodd provide us with a margin of safety in the event the worst-case plays out. Maybe, maybe not. Even Graham himself admitted that his standards increase probability that investment will work out. It does not guarantee anything. There is no single investment that can provide margin of safety in the event of worst-case. And I am not talking about supernovae either. Practically any company can be kaput tomorrow if there is a widescale fraud inside of it and/or its products kill a bunch of people. Margin of safety usually is against a "somewhat bad case" and not against "really worst case". But I am not arguing that Klarman's or Graham's standards have no value. I believe they do. They do increase the probability that you as investor will succeed and that's quite a lot. However calling them some kind of "absolute value standards" and railing against investors who don't adhere to them is IMHO misleading and not productive. Good luck to you.

To: paulelgin who wrote (51812)	6/30/2013 1:22:48 AM
From: Jurgis Bekepuris	Respond to of 78774

BTW, even if we defined "absolute value" investing as some kind of P/B or P/liquidation value investing and "relative value" as mostly everything else (you can clarify your definitions if you want), I would argue that "relative value" as demonstrated by Buffett is perfectly valid value investment method. Unless you are coopting his methods into "absolute value" somehow. But then I am not sure what is left for the "relative value" you dislike... Perhaps you can clarify. (I don't agree with these terms, but you seem to be attached to them so we can use them for now in this context).