Value Investing

If anyone works in finance, chances are they have at some point, or more likely, constantly, received emails (we want to keep it civil) to participate in the Value Investing Congress, which purportedly, promotes ideas based on, well, value. Alas, if that is indeed the case, then primary sponsor Whitney Tilson's T2, has to urgently look up the definition of velue. To wit: "Our fund declined 13.3% in August vs. -5.4% for the S&P 500, -4.0% for the Dow and -6.4% for the Nasdaq. Year to date, it’s down 21.9% vs. -1.8% for the S&P 500, +2.1% for the Dow and - 2.2% for the Nasdaq." Even more to wit: "On the long side, our portfolio got clobbered across the board despite generally good company- specific news regarding our major holdings (discussed below). Amidst a tumultuous month in the markets, investors dumped stocks that were even slightly illiquid, or that are valued primarily on future, rather than current, profits – both traits that characterize many positions in our fund. One of our biggest advantages is being willing and able to look out 2-3 years when most investors are looking out 2-3 months (or, in many cases, 2-3 microseconds), but this hurt us last month." But wait, despite what is basically the start of yet another hedge death watch, Tilson sees smooth sailing ahead. "In our view, the turmoil of the past month has created the best bargains we’ve seen in the market since the chaos and panic of late 2008 and early 2009. Of course stocks aren’t anywhere as cheap now as they were then, but the risks aren’t nearly as great either (we think many people didn’t realize or have forgotten how close we were then to a worldwide Great Depression), so on a risk-adjusted basis we think our portfolio is as attractive now as it was then." We can only hope Whitney has some, any, money left to spend on chasing these amazing value bargains. In the worst case, the fees from the VIC conference should find the purchase of at least one block of ES.

Didn't make it to Pasadena this year for the Value Investing Congress? Well, you are in luck because I was fortunate enough to attend and take notes on what was said by great investors such as Howard Marks and Steve Romick. The following are my 70+ pages of notes from the event.

"I have seen many people debate whether gold is a bet on inflation or deflation. As I see it, it is neither. Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible. Gold did very well during the Great Depression when FDR debased the currency. It did well again in the money printing 1970s, but collapsed in response to Paul Volcker’s austerity. It ultimately made a bottom around 2001 when the excitement about our future budget surpluses peaked." - David Einhorn