With the rampant proliferation of workshops, courses and books purporting the theory of value investing the Warren Buffett way, will there be lesser value buys in the future when more investors follow the “rules”? Will the stock market tend to become more efficient in the future? Will value investing cease to exist soon? These are scary thoughts that a value investor would not want to see being materialized.
Nowadays, when you flip open the Straits Times, there are many advertisements about courses on value investing showing up almost everyday. Just recently, more books were published on investing like Warren Buffett. I came across three and they are “Creating a Portfolio like Warren Buffett”, “Moats : The Competitive Advantages Of Buffett And Munger Businesses” and the best title so far goes to “Warren Buffett Invests Like a Girl: And Why You Should, Too”. More people are becoming financially savvy and more knowledgeable. I’m taking notice of all these as I’m into value investing and my eyes choose to “focus” on these proliferation. Just think about it. Let’s say you have chosen to buy a particular model of a car. As you are out-and-about, you will take notice of the very same model of the car you have in mind and see many cars of the same model on the road. They were all the while there but your eyes chose not to focus on them. Even though there has been a perceived proliferation of value investing courses and books, my take is that value investing will not cease to exist.
Why would value investing still prevail? Most people are still encouraged to trade and make quick bucks out of the market. People don’t like waiting and long-term investing is an oxymoron to many. Just look at how the prices of stocks shoot up when there’s a good news and prices plunge when there’s a bad news. Institutional traders, part-time/full-time traders, people who don’t know much about stocks, people looking to make quick bucks and people with “itchy fingers” still trade widely in the markets. The media (TV, newspapers, Internet, etc) encourages trading. Research houses and analyst reports encourage trading. All these heavy buying and selling bodes well for value investors. Trading creates liquidity and volatility. Good news = buy, bad news = sell become the rules of the day. When the crux time comes and a crisis strikes, not many have emotional stability and thus, sell heavily in panic. They flee the market wondering why they bought the stocks in the first place. This is when value investors rejoice. It’s like a Great Singapore Sale, except that now it’s in the stock market and it can happen in any month.
There can be lots of courses and books on value investing but not everyone’s psychology is suited for long-term investment. It’s the psychology and lack of emotional stability that will cause value investing to flourish and has caused it to flourish since the time of Benjamin Graham. When crunch time comes, how many investors become greedy when the world is fearful? Not many. This was seen in the Great Financial Crisis of 2008/2009 and it was seen in all the past crises. It will still be seen in all the future crises that’s about to come. Old habits die hard.