142 The Business of Value Investingarise if the stock price doesn ’ t reach your target. It ’ s silly to forgo a
potential 82 percent return for the possibility of earning a 100 per-
cent return at the risk of missing out on the opportunity to invest at
an already attractive price. Attempting to bottom fi sh makes invest-
ing much more diffi cult — and potentially more damaging — than it
should be.
It ’ s crucial to understand that these discussions are intended
to provide a framework for how investors should be thinking about
stocks if their goal is to truly invest. The purpose of making invest-
ments is to allocate capital today that gradually will appreciate at an
acceptable rate of return over a period of years. In order for invest-
ing to prove benefi cial, investors must invest at sensible prices and
do so for a period of years, the longer the better. The year 2008
was horrifi c for stock market investors and easily the worst year for
the current generation of investors. Reading this book and think-
ing about 2008 will make it seem that the philosophies espoused
about investing are outdated or no longer valid. In thinking in this
way, you are training your mind to think in exactly the manner that
is most detrimental to investment success: You are equating short -
term market votes with long - term fundamentals of the businesses.
No one will dispute that markets today have it more right than they
did 50 years ago, but if you stick to your principles and invest based
on sound value - oriented business fundamentals, the markets will
pay you for it over time.
Consider Table 7.4 , which clearly illustrates the market ’ s short -
term viewpoint against the long - term fundamentals for the follow-
ing group of randomly chosen businesses.
As you can see, if you had invested in any of the businesses
in the table in 2000, three years later you were likely sitting on
losses. The market experienced a severe correction in 2000, after
the euphoria that engulfed the Internet came to a crashing halt.
Regardless of the industry, most investments made in 2000 declined
substantially in the following years. The table clearly illustratesCH007.indd 142CH007.indd 142 9/2/09 11:47:27 AM9/2/09 11:47:27 AM