The Business of Value Investing.pdf

Invest Significantly at the Maximum Point of Pessimism 193

What the market hates, value investors often love. When the mar-

ket is down on a particular business, sector, or industry, the demand

from buyers is at an all - time low, leading to greatly depressed security

prices.

Key Takeaways

• Buying securities during periods of pessimism is the most diffi cult
  task in investing; appropriately, it the greatest determinant of investment
  success.


• Before investors can be truly successful at investing during periods of
  maximum pessimism, they need to be wired with the characteristics of the
  value approach: patience, discipline, and risk aversion.


• The key characteristics of the value approach rely more on investors’
  temperament than on their level of intelligence.


• Pessimism leads to lower security prices, which offer investors the likeli-
  hood of fi nding more bargain investments and thus the greater chance for
  future capital gain.


• Euphoria in the stock market can be a great indicator that security
  prices are at premium valuations.


• The most valuable businesses often have stock prices that offer little or
  no value.


• Value investing has defi ned characteristics, but the approach can be
  very fl exible with respect to where value is found.

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