I do not consider myself a value investor because I hold the term "value investor" in awe and believe I am not in the league of "value investors"
Before I start, I want to be very clear what I hope to achieve in this post. I want to explain my take to beginning value investor wannabes who are doubting or confused about the doctrine. I am not implying it is the only way, neither am I saying it is for everyone. If u are experienced investor, this post is not for you.
1) "Long term" and "buy and hold" does not work well?
For value investing, Warren style, they want growth to make a stock cheap. WArren buys big company with moat that can continue to grow in the longer term. So they believe time is part of the equation to returns, like the goose that laid the golden eggs.
Now, they have the discipline to ride out various market cycles and they buy with MOS, so usually it is during down cycle that you get good MOS. So if long term means Mutiple bull and bear cycles, wouldn't it be better to buy at bear, sell at bull and buy back at bear. Buy and hold is stupid and not optimising returns, isn't it?
Value investors do not believe in timing the market. I am not saying no one can, one should properly throw in the sink if he can predict the up and downs of market CONSISTENTLY. Anyway, although Hathway do not pay dividends, the companies they buy almost all pay dividends. So the concept of eggs harvesting apply. Also note the eggs either get bigger or more as compared to initial cost capital. Need not look far to Warren, just look at local Uncle CW. Yield on cost.
Do not look at the gap between the peak and the current price and think buy and hold is stupid.
2) Value investor don't sell?
That is FOS. They sell if they believe a moat is gone or if something is grossly overvalued. Do not mix up buy and hold with not selling. However, it is true that do not aim to sell at the peak, although if something is grossly overvalued, it will be at a peak, but if they sell if they think the moat is disappearing, they might well be selling at a loss too.
If you ask me to explain my take on value investing and summarized in 2 simple sentences. They are:
1) buy cheap
2) keep your balls during bear
For detailed explanation, read chapter 8 and 20 of the intelligent investor.
Ok, I think ruffles enough feather from SMOL's camp. SMOL yuan Xiao is over, feel free! LOL