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

To: bruwin who wrote (66776)	3/3/2021 5:10:25 PM
From: petal	3 Recommendations Recommended By E_K_S Lance Bredvold Nya_Quy Respond to of 78957

You have your way, and I have my way .... And each to his own! One of the best times to buy more of such a stock is if there's a General Fall-Off in the stock market that depresses the prices of all stocks. We saw that back in 2008, and more recently in early 2020. Yep – one of the best times to buy the stocks everyone else usually will want, IMO. (Also one of the best times to buy 'value', it seems, as they oft times fall more in a decline) (although in a massive panic, all correlations of course goes way closer to 1 than usual.) One of the best times to buy generally, obviously. in hindsight, 'value' was better to buy in 2003 bottom, 'glamour/growth' better in 2009, and once again in 2020. Next time around, a lot seem to be indicating that 'value' will once again be the better choice generally. There seem to be secular quite clearly defined cycles in these things, indeed driving the economy &/ stock market. those Quality Companies will be the first ones to be in demand Along the above lines, I feel like one should buy "wonderful businesses" in peak panic ('09) cigar butts after that initial panic has subsided ('10-'12) and "glamour/growth" when calm has been restored ('13-'15). And then one should gradually leave the market as the optimism becomes stronger and stronger, to the point of "loosing faith in itself" ('16-'18; when mania is once again prevalent ('19-21), one should only have those funds invested that one is quite comfortable loosing almost all of. In other words, the share price of a Quality, Profitable Company falls through no fault of its own business, but more often than not because the "Expert(?)" Fund Managers are offloading thousands of stocks from within their portfolios, and their large stock volumes affect the general market. Indeed. And the same, I would argue, goes for the way up, just more slowly. Every good quarterly, the funds buy, as long as the trend is good. "There's leaders, and there's followers"; and then there's contrarians waiting for the next trend before it's begun. If the news is bad enough about a Company, then why "buy" it ? Well, the reasons are several, but most importantly, because "the stock market in the short run is a voting machine". And most people tend to overemphasize short term movements in earnings as well as stock prices. (Might be slightly different for your 'wonderful companies' however, where a decline in earnings might be more meaningful. I would think that the same would hold true there too, however; people would likely read a little too much into it, when it might be temporary "randomness". But funds may leave because of it, as those stable earnings and supposed predictability was the main reason they were in it in the first place – as well as other complications.) Another way of putting it: mean reversion. Never substitute Popular Wisdom for Independent Thinking." Good points. One should not be contrarian for the point of it, and it's easy to be it "by proxy", if one is generally prone to play devil's advocate and question every statement one hears (even ones own). That being said, I think that pure, "systematic" contrarianism would likely generate outstanding returns in the stock market, as almost everything that the average retail investor does is catastrophic. Like Steve Eisman is quoted in The Big Short as saying (about a CDO fund manager): "I want to short everything that that guy owns". But being able to override the system is still better. One should always try to monitor oneself in that way, and put checks and balances in place, so to speak. (Then again, one should also be keenly aware that the vast majority of people will do better with the systematic approach, since they too will harm it with "human stupidity" instead of improving it, and that the probability of oneself being an exception to that general rule is low. ("Greenblatt's experiment" is an illustrative example.) And if one should seem to be able to pull that off despite the odds, one must be extremely aware of any signs of hubris (not least because it might still have been, at least in part, pure luck). Takes a certain kind of self-discipline that most of us do not have.)