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

To: Michael Burry who wrote (4760)	8/24/1998 12:20:00 PM
From: Axel Gunderson	Read Replies (1) \| Respond to of 78596

Michael: I am very very aware of what constitutes Graham and Buffett methods, but I think we are both talking "around" one of my central points. You are talking about long term holding, but you haven't defined long term. And of course what we describe as "long term" in investing is at odds with economic long term. But looking at Graham, or for a more contemporary example, Dreman, fair value is not usually expected in a few months. If somebody wants a realistic shot at that, they had better limit themselves to very large, well-known companies. But more generally, we have to be accepting of holding periods on the order of 2-4 years. I'm not saying that we should look to hold that long, I'm saying that we should expect that it may take that long in many (most) cases. BTW, the results I gave are for companies held under that duration, so without my specifying the selection method, nobody can accurately infer whether they were Buffett or Graham style picks. The reason I am hammering on this issue of holding period is that given the inherent volatility of the market (not just today, but historically) and all the things that can go wrong, it is unrealistic to expect to earn extraordinary returns quickly on any kind of consistent basis. If you can give me any examples of any "value" investor who has done so, I'd be most interested. This ties in to the margin of safety. Where is the margin of safety in a company that you couldn't hold for a few years - knowing that, like it or not, market conditions might make such a holding period essential for practical purposes? Axel