The Business of Value Investing.pdf

150 The Business of Value Investing

Many investors are quick to ignore the enormous value that a

dividend yield can add to the overall results of a particular invest-

ment; this ignorance comes with an expensive price tag.

Swimming against the Current

The modern fi nancial world does everything it can to exacerbate

the short - term orientation of many investors. The perilous con-

sequence of these activities is promoting the mistaken belief that

investing is easy, when in truth investing demands rigor, intensity,

and painstaking work. For example, CNBC today uses a digital

clock format to constantly update investors with the changes in the

market indexes. This clock goes so far as to measure time in hun-

dredths of a second; the numbers fl ash by so fast that you can ’ t see

them. What rational purpose does this mechanism purport to offer

the serious investor? Absolutely nothing. Such tactics serve only to

mesmerize the viewer ’ s attention with levels of adrenaline that are

deadly to a sound investment philosophy. To the crowd, patience is

madness; to the value investor, patience is wisdom.

Further waging the fi ght against a steady and patient investment

approach is the industry ’ s view of cash. The investment industry

trains us to think of cash as a deteriorating asset. If you are sitting

on cash, then you obviously do not know what you are doing. To

the patient long - term investor, the value of cash is indirectly pro-

portional to the availability of bargain securities. As bargain securi-

ties fl ourish, holding cash is as imprudent as investing in overvalued

securities. When bargain securities are scarce, sitting on cash is the

most intelligent investment decision. As is often the case with cash,

when you don ’ t have it is when you need it most.

The patient investor is very comfortable waiting, ready to make

an opportunistic investment when the time is right. Cash allows the

investor (a) to avoid selling what is cheap in order to buy another

cheap asset and (b) the opportunity to take advantage of any special

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