Is time an enemy for value investing?
Hi everyone,
I'm currently preparing for asset management interviews and I stumbled upon this question. Does any of you have an idea of how time could have a negative impact on value investors? Also, do you think value investing is about going against the crowd and buying what nobody else wants to buy?
Thanks a lot in advance for your help! Cheers
I don't really understand the question. Generally, it takes time for value investment theses to play out... It can take months or years for the market to finally agree with you, so I'd say time is definitely not the enemy. On the other hand, time might be an enemy if you give up on your thesis before it can play out (despite being right, etc).
And yes, value investing is generally boiled down to: 1) going against the consensus view, 2) being right, and 3) the market eventually agreeing with you.
When you invest in firm the real value will take time to realise itself however during this lapse of time markets/conditions/the firm will have changed therefore changing the value of the firm, hence somewhat yes
Almost this exact question was asked by someone else in the HF forum. Posted my thoughts on it https://www.wallstreetoasis.com/forums/theoretical-questions-regarding-…</a">here
Phew, now that that's off my chest I can ask: Are you referring to "Deep Value Investing" or undervalued investments? Clarification would help.
Assuming you're referring to Deep Value investing I think Moneykee hit the nail on the head.
If you're referring to undervalued Investments then I would say time only has a negative impact on value investors when the rest of the market overcomes the learning curve of becoming privy to the fair market value of the investment. An opportunity cost of being too slow to pay a competitive (undervalued) price so to speak. When it comes to going against the crowd, I would say a more mechanical valuation like a DCF model, DDM model or 3 statement model is all that's necessary to determine a buy or sell; the crowds opinion in this case being largely irrelevant.
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