By Samuel Taube
There’s one asset class whose returns tower above all the others. Benjamin Graham discovered it. His disciple, Warren Buffett, made billions with it. And our Chief Investment Strategist Alexander Green has been writing about it for the last week…
The best-performing asset class of all time is value stocks – publicly traded companies that are exceedingly cheap relative to sales, profits and net asset value.
By and large, the most successful investors in history didn’t make their fortunes using complicated technical analysis. Nor did they get lucky by buying into growth stocks like Amazon (Nasdaq: AMZN) or Netflix (Nasdaq: NFLX) at the right time.
They simply bought and held companies that were trading at a discount to their intrinsic value. In today’s webinar, Alex will show you how to do the same.
The “Death” of Value Investing
You wouldn’t know the power of value investing from listening to the financial media.
Last Monday, Alex quoted from a recent Wall Street Journal article on the so-called “death” of the technique:
Value stocks have fallen so far out of favor that Goldman Sachs in June questioned whether the markets are witnessing the death of value investing.
Of course, Warren Buffett taught us to be fearful when others are greedy – and to be greedy when others are fearful. Whenever the mainstream press says that a particular investment is dead, it’s probably a good time to buy it.
Indeed, value stocks have had six brief slumps in performance since 1945 (including the current one). But they’ve come roaring back after each of these periods.
The data clearly show that value stocks go through brief periods of lagging behind growth stocks. These periods are infrequent, last less than 10 years and are inevitably followed by much longer periods of value outperformance.
So why are so many commentators convinced that value investing is dead?
Alex blames a psychological phenomenon known as recency bias. The human mind tends to assume that things that happened in the recent past will keep happening forever – or at least into the distant future.
But as we’ve learned in the last week, value stocks are set to outperform in the not-so-distant future. And investors who follow the herd into growth stocks are setting themselves up for disappointment.
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Benjamin Graham’s Billionaire-Maker
You don’t have to be an expert analyst to see how much value outperforms growth in the long term. You just have to look at a simple chart.
Last weekend, Financial Research Associate Brian Kehm provided us with such a chart. It showed that small cap value stocks have tripled the performance of the S&P 500 since 2000.
But our team has uncovered an even more decisive argument for value investing. And it’s not a graph or a quote… but a story.
It’s the story of four ordinary men from blue-collar neighborhoods. None of these men came from exceptional backgrounds – they didn’t have the wealthy upbringing or prestigious education we associate with investment heavyweights.
But each of these men used a simple set of value investing techniques – the same ones pioneered by Benjamin Graham and …read more
Source:: Investment You
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