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The business of value investing – Six essential elements to buying companies like Warren Buffett- Charlie Tian 2009
https://bbs.pinggu.org/thread-695143-1-1.html (Page 147-153)
Have the Discipline to Say No (The fourth element)
阅读到的有价值的内容段落摘录
The intelligent investor is likely to need considerable willpower to keep from following the crowd.
- Benjamin Graham
Arming yourself with a sound investment philosophy and search strategy puts you on the path to selecting businesses suitable for investment. Once a business is valued, the most difficult determinants of whether to invest or not come into play. Unlike valuation, which primarily relies on quantitative measures, investors now must rely on qualitative factors:
• Having the discipline to say no
• Being patient
• Having the courage to make a significant investment at a maximum point of pessimism
These factors are exceedingly important because the probability of suffering investment loss is significantly higher due to the emotional underpinnings of these factors. Consider the next fictitious example. A particular security is selling in the market for 25 a share. The strong fundamental qualities of this security are well known, and as a result, the stock has typically traded at a fair to overvaluation. At the current price of 25 a share, the stock is indeed slightly above fair value. Eager to buy, an investor is on constant watch for any dip in stock price, but the dip never comes. Instead, over the next few weeks the stock seems only to go up in price and is now at 35. Not wanting to miss out on the continued rise, the investor rushes to buy in. In the next few weeks, the stock is back at 25 and the investor, an able and bright fellow, feels like the dumbest man on the planet. His downfall had nothing to do with intelligence. Instead, it had everything to do with emotions dictating the investment decision. Whether the security will trade above his purchase price a year from now is irrelevant. Even if that happens, it’s just as foolish to dismiss the investment as an intelligent one because the investment process was manipulated by emotional decision making. Next to taking a loss, nothing is more painful than the aforementioned chain of events. Learning to say no until the price is right is of paramount importance. Most investors are smart; few, however, are disciplined enough to say no and move on or, more important, be patient. This chapter illustrates and explains the benefits and consequences of an undisciplined investment approach versus an investment approach characterized by discipline. Very few activities in life can be practiced successfully without some degree of discipline. Being disciplined requires you to think independently and ignore crowd psychology. Discipline requires investors to be confident in their research and analysis and be prepared to receive criticism from all angles. Yet disciplined investors clearly realize that investment success comes from sticking to their methods and not participating in crowd folly.
Rarely do we find a field where the level of intelligence is not directly proportional to long-term success. Investing in the stock market is one such area. After a certain level of competency with respect to fundamental mathematics and reading comprehension, our success as an investor is no longer predominantly dependent on how much smarter we are than the rest of the field. Instead, discipline and temperament take over as the defining contributors to long - term success. After a certain IQ level, an increased IQ does not guarantee added investment success. Referring to our fictitious example, the ultimate success of the investment decision was not based on intelligence but on emotion. The investor could not allow himself to “miss” the continued rise in the price of stock. Disregarding any fundamentals whatsoever, he made the assumption that because the shares had continued to go up for weeks, they would continue to do so. What is important here is not the investment performance but rather the process employed to make the investment. Achieving long-term successful investment results runs in a very similar way. A successful market-beating investment track record is not reliant on having an abnormally high success rate. It is possible to be right 30% to 40% of time in our investment picks and still deliver hall of fame type results. The key is to make sure that the winners grossly overcompensate for the other 60% to 70% of unsuccessful decisions. The only way this is possible is through unwavering discipline in our investment approach. Discipline is what separates sensible market loss from foolish market loss. If we are disciplined and our approach to investment is sound and business-like, our winners will more than compensate for our losers. The undisciplined investor is the one who racks up losses similar to the fictitious example given earlier. Succumbing to investment losses in this manner can mean the difference between an above - average and a below - average investment track record. In cases like this, be disciplined enough to walk away and search elsewhere. Always remember that any business is undervalued at one price, fairly valued at another, and overvalued at yet another. The intelligent investor’s goal is to buy at the undervalued price, avoid at the fairly valued price, and sell at the overvalued price. Only by maintaining a very disciplined approach can this strategy be carried out effectively.
阅读到的有价值信息的自我思考点评感想
As is often repeated in value investing, price is what we pay and value is what we get. Once we have identified a potential investment, and our data and reasoning lead us to conclude that we have a great business run by able and honest management, we still have to be willing to hold off if the price is not right. Price is the key determinant of value in investing. In investing- and in business in general- our profits are made when the asset is bought; we just don’t realize at the time. The price paid will determine the discount from intrinsic value received. The price paid will determine the margin of safety an investment carries. If the stock pays a dividend, the price paid determines the dividend yield, as a lower stock price increases the dividend yield. Emotional habits can be quite expensive over time. In investing, the starting point of every investment is significant. An additional 2% to 3% points per annum earned on an equity portfolio over a 20 – year investment horizon add an additional 45% to 73% to the nest egg at the end of the 20 - year period. A little means a lot. The concept of price paid and value received in investing deserves a greater degree of significance than many other concepts because it is so easily misunderstood. Unlike the concept of margin of safety, which is relatively straightforward, the concept of price versus value can be misinterpreted easily. All too often, a disproportionate amount of attention is focused on the price aspect and not the value aspect.
The greatest error to which investors fall prey is relating the price level of a security with the anticipated future value to be received. The danger in thinking this way is that the approach is no longer of that of investing but of speculation. We have all heard investors who rationalize that when a stock price gets so low, it surely cannot go any lower. Thinking about a stock in this manner is misguided and usually leads to financial pain. Stock prices should always be thought about in relation to intrinsic value and degree of discount offered from intrinsic value. After all, until a stock price has reached zero, it always can go lower. It is crucial to realize the element of uncertainty in investing. The market hates uncertainty; in most cases, the low price due to uncertainty is justified. In some cases, though, the uncertainty leads to a price level that offers tremendous value. The goal of the intelligent investor is to exert diligent effort in understanding and valuing the specific situation. If that is not possible, the investor should abandon the security until he or she has a better view of things. The notion of price to value with respect to discipline cannot be overemphasized, especially when we are talking about money and Wall Street. Wall Street has turned the investment profession into one dominated by egos motivated by who can accumulate the most in the shortest amount of time regardless of the soundness of the approach. If we are not participating in the moneymaking operation of the time, we’ve lost our touch.
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