Seeing The Light

Value investors experience an “aha” moment — This epiphany allows for conviction in the practice.

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SEEING THE LIGHT

“It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic.” – Seth Klarman

We do not believe value investing is genetic, but it is deeply ingrained. Value investors tend to have a profound experience that opens their eyes to the power of the style and simultaneously provides the required conviction to follow the practice thereafter.

This is because being a value investor requires a daily, ongoing effort to live the value investing principles. Living these principles, as we will describe, is challenging but rewarding.

The Conversion

Most value investors experience an “aha” moment where the power of the style is revealed. A combination of mistakes, experience, and extensive contemplation of the wisdom provided by generations past result in an epiphany: the realization that all true investing is value investing.

With this deep-seated belief an investor has the foundation to shake off the stigma of speculation and begin to deploy capital in a manner that is proven to generate excess return. But this is only the foundation.

Release, Always Release

Building upon a value investing foundation is an active process of release. As opposed to obtaining value investing skills, the investor must work to release the mental and emotional desires that poison speculators.

Value investors release greed, envy, and ambition, knowing that they will watch others take excessive risk while simultaneously earning the rewards of exaggerated fees, unlimited client demand, and headlines devoted to their genius.

Value investors also release the desire to act, instead patiently waiting upon the world for its inevitable opportunities, which are never as immediate or plentiful as desired.

Finally, value investors deprioritize return, instead focusing on risk and its avoidance. Thus, the life of a value investor becomes a mundane, unenviable existence of abstinence.

This Is the Way

It is not enough to know the truth about value investing; the principles must be lived every day.

The journey of a value investor is long and arduous, requiring an adherence to the value investing code on a daily basis. Even when the style is out of favor, even when the press smirks at how a “new thing” has passed value by, even as value investing practitioners are disavowed by the broader investment community, the value investor has the fortitude to follow the path.

This fortitude comes from the conviction in the style and simultaneous understanding that the rewards of value investing are never immediate but instead accrue over decades, accelerating over time for those who endure.

Peace Within Turmoil

The reward for adopting the value style is inner peace during market turmoil. Value investing is 90% preparation, creating portfolios that can be held through difficult market environments.

Too many investors do not prepare, and instead suffer due to leverage, liability mismanagement, or permanent losses of capital.

Experiencing peace during turmoil renews our faith in the style. We wish everyone could see the light!

“Patience can perform even greater feats than courage, breathing freedom into an otherwise lifeless world.”   Patience—How We Wait Upon the World , David Baily Harned