Comments on: Is Value Investing Marketable? http://investorial.com/value-investing/is-value-investing-marketable/ Investments + Editorials: Dissecting the good, the bad, and the ugly of investment / financial media! Thu, 08 Jan 2009 20:52:50 +0000 http://wordpress.org/?v=2.5.1 By: Hendrik Oude Nijhuis http://investorial.com/value-investing/is-value-investing-marketable/#comment-7484 Hendrik Oude Nijhuis Mon, 01 Jan 2007 14:47:01 +0000 http://investorial.com/value-investing/is-value-investing-marketable/#comment-7484 I have read hundreds of books on value investing, Warren Buffett etc, and publish investment tutorials on value investing myself. I highly recommend Greenblatt’s ‘the little book that beats the market’. It could be one of your best investments ever! Success in investing, Hendrik Oude Nijhuis www.magicformulastocks.com I have read hundreds of books on value investing, Warren Buffett etc, and publish investment tutorials on value investing myself. I highly recommend Greenblatt’s ‘the little book that beats the market’. It could be one of your best investments ever!

Success in investing,
Hendrik Oude Nijhuis
http://www.magicformulastocks.com

]]> By: Ted http://investorial.com/value-investing/is-value-investing-marketable/#comment-2775 Ted Fri, 10 Nov 2006 08:34:13 +0000 http://investorial.com/value-investing/is-value-investing-marketable/#comment-2775 ********************** As well, if everybody is doing formulaic value investing, then value investors will soon see diminished returns from everybody going after those cheap unloved companies. ********************** I think this criticism is silly, because most people are too stupid/impatient to do formulaic value investing. I see people over at Motley Fool that are trying to use this system and they are saying it's obviously awesome bc "I'm up 20% in 6 months" or it's obviously flawed bc "it's not beating the market averages." The ideas and concepts behind the formula are sound- good companies cheap, GARP, whatever. The guy ran a backtest that looks solid, but what's more impressive is how each decile has diminishing returns (eg the first 10% of stocks ranked his way performed better over the life of the test than the 2nd 10% which performed better than the 3rd 10% ... etc all the way down in succession.) So if you have a problem with his work, I'd suggest you actually dig in to some of the backtests and arguments he's actually making, not "relying on earnings is a catch 22 bc they might not be accurate" (well if you're playing the averages by carrying a basket of 25 - 30 stocks, 1 bad apple isn't going to bust you) and "most value investors don't think much of p/e ratio" (greenblatt's a value investor that's pulled 40% annually over the last 20 years and is worth $100 mil minimum, I think he knows what he's talking about.) Either way I think his stuff seems relatively solid. Others that have tried to replicate his backtests don't seem to getting quite the same results, but at the same time they still beat the market by 10% minimum IIRC. **********************
As well, if everybody is doing formulaic value investing, then value investors will soon see diminished returns from everybody going after those cheap unloved companies.
**********************

I think this criticism is silly, because most people are too stupid/impatient to do formulaic value investing. I see people over at Motley Fool that are trying to use this system and they are saying it’s obviously awesome bc “I’m up 20% in 6 months” or it’s obviously flawed bc “it’s not beating the market averages.”

The ideas and concepts behind the formula are sound- good companies cheap, GARP, whatever. The guy ran a backtest that looks solid, but what’s more impressive is how each decile has diminishing returns (eg the first 10% of stocks ranked his way performed better over the life of the test than the 2nd 10% which performed better than the 3rd 10% … etc all the way down in succession.)

So if you have a problem with his work, I’d suggest you actually dig in to some of the backtests and arguments he’s actually making, not “relying on earnings is a catch 22 bc they might not be accurate” (well if you’re playing the averages by carrying a basket of 25 - 30 stocks, 1 bad apple isn’t going to bust you) and “most value investors don’t think much of p/e ratio” (greenblatt’s a value investor that’s pulled 40% annually over the last 20 years and is worth $100 mil minimum, I think he knows what he’s talking about.)

Either way I think his stuff seems relatively solid. Others that have tried to replicate his backtests don’t seem to getting quite the same results, but at the same time they still beat the market by 10% minimum IIRC.

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