Categories
Articles

"Davison" Takes on Value Investors and Growth vs Value

The world which has tried the past ~60yrs to apply science and math to the stock market as if it were something one could study this way. The current MBA curriculum as it stands, is almost worthless for what it teaches or does not teach. What I learned was that people really did not know the basic market drivers.

No one knew this on Wall Street; not a single author of the many Wall Street books including Warren Buffett really knew. What is so confusing is that many like Buffett and so many others is that they “gut” invest. When they write about what they do and how they do it, the words are vague. You could not make a blue print of what these people say they do and apply it to a situation and find that it makes sense. Some say cash flow and then buy something when the cash flows are nil. Some say P/E and then like Miller buy Google (GOOG), Yahoo (YHOO) and still call themselves value investors. Chris Davis uses a formula and totally missed AIG (AIG) and MBIA (MBI). Then Davis thru Miller liked stocks into this Opportunity Fd. and just blew it with Garmin (GRMN), Google (GOOG) and others. It boggles the reasoning.

The Wicksell theme is truly basic and has been lost in time. Modern math has confused the view as it has been improperly applied. The market cannot be parsed with statistical analysis. One needs the empirical approach as is used in Chemistry. You observe data, look for logical explanations and if you don’t find them, then re-ask the questions, look deeper, look broader, look for other relationships with common sense. A straight mathematical analysis in which tons of facts are thrown in the hopper will never throw out the right answer because they never seem to make the right connections. This is the failure of mathematics is that it will not make the human connections that only humans can make. Academics don’t think this way, so we find ourselves down the academic path with much slicing/dicing, value vs. growth argumentations and truly none of this makes sense.

The use of Growth vs. Value Indices is likewise based on false premises. If you take any group of stocks, i.e. R1000, and sort them once a year via value criteria, you will ALWAYS produce better returns for the Value category vs. Growth. I don’t see how people don’t see this as complete nonsense.

Disclosure (“none” means no position):None

Visit the ValuePlays Bookstore for Great Investing Books