The Business of Value Investing.pdf

Develop a Search Strategy 69

In other words, instead of directly delving into how to develop a

good search strategy by suggesting the best places to look, let ’ s fl ip

it around. It is far easier to develop a good search strategy if you

fi rst understand where not to look.

Ignore the Media

On August 13, 1979, BusinessWeek published the now - legendary

issue titled “ The Death of Equities. ” The synopsis for the headline

article stated:

The masses long ago switched from stocks to investments hav-

ing higher yields and more protection from inflation. Now the

pension funds — the market ’ s last hope — have won permission

to quit stocks and bonds for real estate, futures, gold, and even

diamonds. The death of equities looks like an almost perma-

nent condition — reversible someday, but not soon.^1

On that same date, the Dow Jones Industrial Average (DJIA)

closed at 875 points. By the end of the year, the Dow stood at 838,

a decline of approximately 4.2 percent. 2 It seemed that readers of

the magazine were saved by the warning that the “ death of equities

looks like an almost permanent condition. ”

Compiling data from the Dow Jones site ( http://www.djindexes.com ),

I created a chart showing the DJIA performance over the next 10

years (see Table 5.1 ).

If you thought equities were dead, you might have missed

out on what is now arguably one of the best performance dec-

ades in market history. Please note: I am by no means singling out

BusinessWeek as having made a wrong call. All media outlets were

in one way or another disregarding equities as a viable investment

class. BusinessWeek is just known for having the most famous and

sensational cover at a time when the markets were preparing to

make a historic upward run.

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