rsodhi Posted April 23, 2014 Share Posted April 23, 2014 Most deep value investors would find that there aren't many actions to be made in the market right now. Especially on the buyers side of things. Still however, human nature pushes us to be active. And recently, this is a dilemma that I've been facing as I've discovered a few compelling businesses selling for cheap. I'm sure I'm not the only one. If, like me, your heart is telling you to buy but your brain is telling you to remain patient you may find value in re-visiting one of Benjamin Graham's lectures. Here is a short excerpt and some food for thought: You have to wait too long for recurrent opportunities. You get tired and restless -- especially if you are an analyst on a payroll, for it is pretty hard to justify drawing your salary just by waiting for recurrent low markets to come around. And so obviously you want to do something else besides that. The thing that you would naturally be led into, if you are value-minded, would be the purchase of individual securities that are undervalued at all stages of the security market. That can be done successfully, and should be done -- with one proviso, which is that it is not wise to buy undervalued securities when the general market seems very high. That is a particularly difficult point to get across: For superficially it would seem that a high market is just the time to buy the undervalued securities, because their undervaluation seems most apparent then. If you could buy Mandel at 13, let us say, with a working capital so much larger when the general market is very high, it seems a better buy than when the general market is average or low. Peculiarly enough, experience shows that is not true. If the general market is very high and is going to have a serious decline, then your purchase of Mandel at 13 is not going to make you very happy or prosperous for the time being. In all probability the stock will also decline sharply in price in a break. Don’t forget that if Mandel or some similar company sells at less than your idea of value, it sells so because it is not popular; and it is not going to get more popular during periods when the market as a whole is declining considerably. Its popularity tends to decrease along with the popularity of stocks generally. Link to comment Share on other sites More sharing options...
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