2 Big Fat Lies Value Investors Like to Tell Themsel
(2014-09-11 09:17:15)分类: 价值投资大师及言论 |
As a value investor, you are tempted to lie to yourself over and over again. You come up with lies and you fall for it many times. You could call these lies, mistakes, but the results show that they are the same thing.
Let’s go over some common lies that you tell yourself and what to do about it.
Lie #1: “I Know What I’m Buying”
Everybody is a stock market pundit nowadays.
Pick any stock, tell some people it will go up 15% and if your claim happens to be right, you’ve now got “street cred” and 100 new followers on twitter.
But unless you are deeply involved in the business, have first hand experience in a similar business or have spent time and resources into immersing yourself into the mechanics of how the business works, you don’t know what you own.
http://static.gurufocus.com/photos/others/iStock_value_weight_2013_11_25.jpgBig
Most investors are passive armchair investors where going through some news articles and blogs is enough to know everything about the company.
I’m not excluding myself here.
I’ve lied to myself many times.
Reading the annual report a couple of times doesn’t mean you know the company.
It will get you about 30% of the way, but a huge amount of information is left out.
Do a Charlie Munger and invert the reason for why companies file 10-K’s.
It’s not because they love their shareholders and want to share every detail.
It’s the opposite. As much as a company says they care about shareholders, they don’t.
Details are masked with gobbledygook.
Footnotes are buried.
And management would love to leave out as much detail as possible.
You can see why reading the annual reports won’t give you a full understanding of what the company and industry is like.
It’s just a convenient lie that you tell yourself.
In a 2011 interview with Warren Buffett, he gives you a glimpse into how he goes about understanding a business before buying.
CNBC: IBM is a tech company, and you don’t buy tech companies. Why have you been buying IBM?
BUFFETT: Well, I didn’t buy railroad companies for a long time either. I’ve had two interesting incidents in my life connected with IBM, but I’ve probably read the annual report of IBM every year for 50 years. And this year it came in on a Saturday, and I read it. And I got a different slant on it, which I then proceeded to do some checking out of. But I just—I read it through a different lens.
CNBC: What’s the different lens? What’s the different slant?
BUFFETT: Well, just like I did with the railroads. And incidentally, the company laid it out extremely well. I don’t think there’s any company that I can think of, that’s done a better job of laying out where they’re going to go and then having gone there. They have laid out a road map and I should have paid more attention to it five years ago where they were going to go in five years ending in 2010. Now they’ve laid out another road map for 2015. They’ve done an incredible job. First, Lou Gerstner, when he came in, he saved the company from bankruptcy. I read his book a second time, actually, after I read the annual report. You know, “Who Said Elephants Can’t Dance?” I read it when it first came out and then I went back and reread it. And then we went around to all of our companies to see how their IT departments functioned and why they made the decisions they made. And I just came away with a different view of the position that IBM holds within IT departments and why they hold it and the stickiness and a whole bunch of things.
Did you get those nuggets?
I didn’t bold anything on purpose to see whether you took in the same thing as me.
Here’s what I see from this discussion.
- Buffett is the master of railroads, but he didn’t buy them for a very long time.
- Buffett read the IBM annual reports for 50 years before buying anything.
- He dug deeper and deeper to fully understand the IT business and industry even at his wise age
- Best of all, he was never in a rush to buy
If you read the full interview, the CNBC market pundits, who clearly know less than Buffett, always come back to the stock price as opposed to what value Buffett saw or asking deeper questions about the business.
Now the question is, how much do you really know about your companies?
Lie #2: “I Know What I’m Paying”
There is a big difference between the stock price and the fair value price.
Unfortunately, the two get mixed up quite regularly.
In the interview above, the CNBC host annoyingly asks Buffett multiple times about the stock price and why he is buying at the peak.
Buffett tries to answer in a way that will help see that buying at a peak is irrelevant if the value is much higher, but CNBC doesn’t get the point.
I previously valued IBM at $227 to $340 and gave my basic reasoning.
However, many investors don’t go further than the basic P/E and market cap to value stocks.
The media doesn’t help here.
I like working with absolute stock values rather than purely relying on multiples. It helps me to focus on the intrinsic value versus the expected market value.
By having a set target price to work with, I know what I’m paying and what upside and downside to expect.
It also helps because I mentally set a predetermined sell price going into the position.
But if you don’t know when to sell, it’s a good indication that you don’t know what you paid for.
It’s easy to trick yourself into thinking you know what price you should pay.
- You could be too eager about the opportunity
- You could fall into the dreaded “fear of missing out”
- The market could be hyping things up
Without blocking yourself from all the noise and the stock price fluctuations, and just thinking on your own, it’s difficult to know what you are paying.
A lot of the times, you buy based on what another investor said or wrote.
I made mistakes by buying stocks based on another person’s analysis.
I certainly didn’t know what value to place on the stock. I was just following along and being a lazy sheep but I could recite the analysis to make it seem like I knew what I was paying for.
I say this with confidence because I’m not the only one who has/had a problem with this.
This is a common issue.
I get anonymous survey responses and you will be surprised how many people say the same thing.
It could be that time is always limited and people want to take control of their investments but don’t know how.
They feel that somebody who writes a public analysis is smarter than they are.
So they trust an opinion and proceed to lose money.
And that’s why I make sure to do my own analysis.