저자: The Financial Economics · 외국인
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So Joel, you you mentioned buying things for a lot less than they're worth and that that um provides the margin of safety. Yeah. Um would you say that those are the core uh elements in value investing and and do you want to enhance that definition? Uh and or is that enough? Um sometimes I mean uh my definition of value investing is figure out what it's worth, pay a lot less.
It has nothing to do with low price book or low price sales. And so that's how a lot of people like Russell or Morning Star would classify value investors. And so they probably wouldn't classify me as a value investor or a growth investor. They kind of don't know what to do with us. And you know, as Buffett has said, you know, growth and value are are tied at the hip.
I mean, uh, part of what makes value is is investing in a business that can grow over time. So they're they're not two different uh way they're classified by let's say Morning Star Russell. Maybe there's much lower growth in value and and much higher growth than growth and they they they make it that way.
But I I'm looking for good businesses that are cheap. You know, Ben Graham said figure out what it's worth, pay a lot less, leave a large margin of safety. Uh between those two, big space between those two things. Warren Buffett, his best student, made one little twist that made him one of the richest people in the world.
Buffett simply said, "If I can buy a good business cheap, even better." Part of good is a business that can grow over time. And so, um, I slowly gravitated, not not fast enough. I, you know, c certainly in my first decade of investing, gravitated more towards the way that Warren Buffett invests. He's looking for good and cheap businesses, and growth is is part of uh sometimes being
But at the beginning, Buffett wasn't so entranced with good businesses. He he he was famous for starting off with the cigar butt approach uh where he wasn't looking for quality, he was just looking for cheapness. But then he too made a transition. Yeah. I mean my master's thesis at Wharton or it turned into that uh with uh my friend Rich Pazina and Bruce Newberg was a a paper we wrote that eventually got published in the journal of portfolio management about buying cigar butts.
You know, they were called net nets, buying stocks selling below their liquidation value. uh and showed that just buying if you bought it cheap enough, you could make nice money. And and that's sort of the way Warren Buffett started. But when you think about why we move to towards quality, let's say you find a stock that's worth $10 and it's selling at six, it's pretty cheap.
Uh but if you're not controlling the business, uh and it's not in a good business, your margin of safety may erode over time, meaning that $10 could turn to eight if you're not really controlling those assets. And what you're really looking for are businesses or what looks better to me anyway are businesses where that $10 might be growing to 11 or 12.
Increasing your margin of safety. So, uh, I might take a lower margin of safety if I thought that was growing. Uh, but there's there's more buying things cheap works. I mean, cheap alone works. I have nothing against it. It's just that you have to get out of it. So Buffett who runs hundred billion or some number like that it's not easy to go spend5 billion and then go sell it to some other guy who's going to you know pay you more than the 5 billion.
It's too big. So when he was and he said as recently as uh you know around year 2000 he said well if you give me a million dollars uh I can make 50% a year on that there's plenty of opportunities. Your opportunity set shrinks as the businesses become larger. If you can invest in anything, you know, if you don't have a lot of money, you can invest in thousands and thousands of businesses.
Buffett is now looking at the top 300 businesses in size because uh the smaller ones aren't they won't move the needle. So there's a lot you can do in special situations. One thing a lot of my students ask me uh you know and it happened it happens every year now probably for the last five or six years and they and uh the question they asked me at some point in the semester is that you know when you were younger because you're really old they they leave that part out but you're really old and when you were younger things were easier
that goes unsaid what uh well I just said it but anyway uh uh things were easier there was less competition. There were less hedge funds. There were less computers. There were less uh smart guys going into this business. I mean, when I got into it, I was telling Howard before, market hadn't gone up in 13 years by the time I got to Wall Street.
So, it wasn't a place that really was attracting lots of people. Uh so, they said it used to be easier for you, but you know, it must be harder for you know, hey, you stupidly wrote a book about this and there's a lot of uh people doing this now. Not just because of that, obviously. um you know it's harder for us you know you you got the easy stuff and so my response is this people who are very good especially in this special situ I have two responses one is uh people who are good at special situation investing really looking off the beaten path uh for liquidations or recapitalizations or spin-offs or any of those things many of them are liquidity constrained you know Warren Buffett started making a lot of money doing those things but he grew too big and so I ask I I tell them that listen, you know what happens to people who get very good at analyzing businesses in this area.
Uh what happens to them is they make a lot of money and they get too big to stay in this area. So there's always a new group of people who can come in and look at some of those smaller situations because the guys who are really good at it get too big to to really take advantage of some of the smaller or more obscure situations.
And so there's always room for new people to come in that area. And then on a larger scale uh you know because people still teach efficient markets and they'll say hey you know active investing doesn't work and even Warren Buffett's saying go buy some ETFs or you know indexes and and everything else and what I'll say is uh that for most people that's true because they don't know how to value businesses but I will give you a counter and this is what I tell my students and most of my students are around 27ish or something like that.
So I said I tell them all let's go back to when you were roughly uh 10 years old uh where you might start noticing some of this thing and let's go look at the most followed market in the world and that would be the United States and let's go look at the most followed stocks in the most followed world uh in the most followed market in the world and that would be the S&P 500 stocks uh to a large extent and let's take a look at what happened since you were 10 years old.
Take a look at the S&P 500. From 1996 to 2000, it doubled. From 2000 to 2002, it halved. From 2002 to 2007, it doubled. From 2007 to 2009, it haled. From 2009 till today, it's basically tripled. That's my way of saying people are still crazy. And that's really unfair thing to say because this S&P 500 is an average of 500 stocks.
There's huge dispersion going on within that average between stocks that are in favor that people love emotionally and stocks that people hate. So it's really much worse than what I just described. There's huge dichotomy between things people like and people don't things that are in favor out of favor within that that is all this noise is going on within that average.
That average is smoothing things. So if you believe what Ben Graham said is you know here's fair value and here's what the market prices are. It's like a wave around fair value. you and if you have a disciplined way to value companies and buy more than your fair share when they're down here and sell some maybe if you're shorting and when when and and you're very disciplined.
I mean uh I make two guarantees to my students first day of class. First guarantee is this. If they do good valuation work, I guarantee them the market will agree with them. I just don't tell them when. Could be a couple weeks, could be two or three years. Uh but I tell them the market will agree with them.
And the and the uh correlary to that is this and it's very powerful. I tell them in 90% of the cases for an individual stock 2 or 3 years is enough time for the market to recognize the value they seek if they've done good work. When you put together a group of companies that actually on average is actually happening quite a bit faster.
So um you know both those are very powerful. It just says good work will be rewarded. So, I don't think the reason people don't beat the market is because the market is efficient or even close to efficient or not emotional. It's very emotional or that it can't be done. There's all kinds of institutional and agency reasons and tons of other reasons why they don't do it.
But because prices are efficient, if you just pick up the paper, observe what's going on, or listen to what I told my students since, you know, when they were 10 years old, it's pretty clear that people are still crazy and there's opportunity out
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