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Long Term Value Investing: The Buffet & Benjamin Graham School of Investing

It's rarely in fashion. It can often be boring. It can take time for the markets to value fairly. What is it?  It is the long term value investing methodology used by some of the greatest investors of all times such as Warren Buffet and Benjamin Graham. The basic premesis is to look at the intrinsic value of a company and if it is priced for less than what the market is saying it is worth you have a net price advantage.

If the company - in addition - has steady growth prospects, a strong cash position, a leading brand, is well managed and is expected to return growth and profits of "x" percent a year and pays out a dividend, then a value investor can make a reasonable investment assessment that the company will not only be alive and well, but also worth more than what he will be paying for it, especially if it's instrinsic value is more than what the market is saying it is worth.

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Sometimes, Forgetting About The Markets is Good Therapy! A July 4th Weekend Should Be One of Those Times

Getting riled up and down or worrying about the markets - all the time - is not a healthy way to live, most people would agree. All Markets go in cycles, and given enough time and providing that you are well diversifed, the markets have proven out over more than a couple of hundred years that they will weather the most harsh storms and continue to grow over the long term. Growth is not a straight line. A long protracted bear market scenario is of course serious but no-one is expecting that to be the outcome of the coronavirus crisis. Yes, it may take longer than any one of us may like to discover an effective vaccine and administer it, but this will eventually happen. An enormous ammount of resources and scientifc brain power is being allocated to the discovery, manufacturing and distribution of a vaccine in every country worldwide. And despite global tensions among super-powers, scientists are collaborating on a global scale.

We will get through this time. Business conditions and markets will improve and likewise employment numbers will rise again. There will also be significant hardship faced by many who are unemployed and we can but hope that governments will continue to find ways to ease their burden until the employment situation can get back to pre-coronavirus levels.

A good reason to get a financial advisor is that they will do the worrying and managing of your investment portfolio for you. They will be more objective in times of crisis and able to provide advice that will help steer you in the right direction and away from doing anything that might worsen your situation.

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Fake News Is Not New! It is a Practice That Has Been Used by Traders, Banks and Large Investors For Hundreds of Years

Fake news is not NEW. It has been used for hundreds of years to mislead or mid-direct in times of war, crisis and when big money is on the line. It's just that there is so much news in todays media rich world, it is hard to know who is telling the truth in any given moment. Everyone has an agenda. Whether it be a CEO, investor, hedge fund, public health official, governor, news channel or president. Everyone has something to gain or lose in a given situation and to whatever degree it is serving someone's personal, business or institutions goals or ambitions, bending the truth to telling outright lies will depend on how much is at stake and how willing someone is to cross ethical or moral lines.

As an investor, it is important to pay attention and ask the hard questions when reflecting on what any particular source of information is saying about a company or market. What is being said, by whom and why are matter of fact questions to be asked. These questions along with a discerning perspective can save you money and make you money, stop you from making rash decisions and help you stay rational.

Below are just a couple of examples to illustrate these points. We could provide many more. These examples are high profile examples of what we are referring to.

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Often, Investing in the Markets is Knowing Who To Listen to & Who Not to Listen To

Jeremy Grantham

There is a saying that "It's not what you know" but "Who you know" in life, that is the most important thing for making progress. There is of course truth to this saying. Getting to the right people for any particular endeavor in life is a combination of research, persistence, creativity, connections and luck as well as a good dose of courage. Fearless entrepreneurs and investors have persistence and courage in spades and you only need to read a few biographies to know that meeting the right people can be a process that takes a few rounds of trial and error. Their vision of "what can be" or "What is" drives them in their pursuit of success. Everyone can do well with the right mentors.

Today, we are going to write less and let you listen to Jeremy Grantham, a veteran investor whose bio is below. In this interview, Grantham share his views on the markets as well as US and global equities. It is well worth listening to.

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Science, Markets & Reality. Who is on First?

In our last blog post which we published last week, we wrote about the Efficient Market Hypothesis [EMH] and whether it was true, half-true or half-false. We fielded different responses to this post, half of which stated "of course, markets are inefficient" and the other half stating "they are efficient most of the time". We pointed out that these theories do not take "human nature" fully into account. History charts a series of irrefutable market bubbles and busts across multiple asset classes. When you are actually in a bubble or bust period, it can feel like conditions will go on indefinitely. The law of market cycles sais otherwise.

Over the last two months, the markets have charted a strong recovery track defying the hard hitting economic realities of the impact of the coronavirus. They have been - or so it appears - in denial of what all medical specialists and virologists are saying, which is that the coronavirus will inevitably re-surface in the fall of 2020, if it even disappears or lessens in-between. There are no maybe's, it's a 100% guarranteed. There is a reason why Operation Warp Speed [OWS], the government funded program to fast track the development of a vaccine, as well as its manufacturing and distribution, was established. Without a vaccine, a large sector of the general population are not going to get back to life, work and patterns of consumption as they were pre-coronavirus. The virus is highly transmittable and without vigilant precautions and collective discipline, we are only going to make it easier for it to find a path to its next host.

It is not a secret that the virus has not been contained and cannot be effectively contained without such collective effort. It is not a matter of dispute among medical experts. Until today, the markets have seemingly been ignoring this fact which has been continuously stated by medical experts. Even Jerome Powell, the chairman of the federal reserve, when interviewed a few weeks ago about the impact of the virus and what the Fed was doing, talked about various scenarios which would of course be worse he said "if the virus were to return in the Fall". But there are no "If's" from the perspective of every virologist on the planet. Did this fact go un-noticed by Mr Powell? We think this is unlikely.

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Hawley Advisors
1600 South Main Street, Suite 190
Walnut Creek, CA 94596
Phone: 925-906-9800
Fax: 925-906-9884
info@hawleyadvisors.com

 

 

Hawley Advisors is an investment advisor, registered with the State of California. Any investment ideas or strategies on this website are for the purposes of education and general information only and should not be construed as specific investment advice. For more information about our firm please check the SEC Public Disclosure website: https://www.adviserinfo.sec.gov/

 

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