Today is a Tuesday. In Singapore where I live, it is Vesak Day. So Happy Vesak Day to all my readers, friends and supporters! A bit of a lazy day actually, doing some random reading and writing. Because this blog focuses on deep value investing, my mind is always thinking of things to write about. I have a whole list of ideas and stories to share with viewers of this blog and hope to share some meaningful ideas with readers. Regardless of that, I have to admit sincerely that there are times that I don’t know what to write about, a sign of fatigue from writing 5 whole books on deep value investing. But anyhow, it helps to keep the brain working and active. This place is also perhaps a great way to pen down some of my random thoughts about investing and life. This acts as a journal of sorts.
Coming back to the idea about value investing, the literature on value investing is all out there. Whether one is talking about deep value investing or investing in GARP companies, the investing literature is pretty much out there. What I hope to do is to organize this information from a deep value investor’s perspective to the best of my ability and add a few inputs here and there. Hopefully, the information here will be of value to investors the world over.
So a pretty random post today. And some random thoughts as well. Do bear with me.
But anyhow, I had a curiosity of how Jeroen Bos’ stocks are actually holding up.(I am not sure if he has actually sold out of Barratt Developments. Maybe he did.) I remember reading up about a stock called Barratt Developments PLC. The company which was founded in 1958 is one of the largest property developers in the UK market. Jeroen as I recall was wary of some of these companies during the throes of the subprime financial crisis. Not surprisingly, it took him some time before finally sinking his teeth into some of these debt laden property stocks.
The key issue then was how are these companies going to deleverage and what was going to happen going forward for some of these companies. There was a whole lot of uncertainty. But for those who feel that net current asset value stocks only works on nano cap stocks, you really should look at Barratt Developments PLC.
Today, in mid 2018 as I write this, Barratt’s market capitalization is 5.68 billion. Back in 2008, the market capitalization of Barratt Developments was only 240 million, a far cry of today’s market capitalization. The company’s price appreciation is shown below.
Source : Google
If one could have purchased at prices less than 50 p, imagine what that percentage profit would have been like if one held on to today. That would have been quite fantastic if you ask me. But the truth is in times of uncertainty, it is always extremely hard to take a stand in opposition to other market participants. The atmosphere of fear and uncertainty can really cause people to act irrationally even though the markets are saying “Take it! It is yours at this price!”
If only we could be disciplined in a systematic way that forces us to reduce the biases within our system, our investing results would have been far superior to many others. But every time a crisis hits us, we scramble for the doors. That is the problem with most of us. And I have to say that I have that bit of tendency in me as well. What helps as I have experienced is a certain detachment from money. I get it. I get it that many of us want to be wealthy. But in the search for wealth in the stock markets, we act to sabotage our very selves and our investing returns do we not? We sell when we are supposed to buy and buy when we are supposed to sell for a whole host of reasons. But let us put the idea of wealth aside for the moment. Impermanence is a fact of life and nothing is constant. That being said, these cycles of booms and busts are actually opportunities for the informed investor. Hence, as cliche as this sounds to many out there, I would propose the following when it comes to investing in the stock market. Focus on the process and not the proceeds. Be absolutely certain how you want to go about building your portfolio and be absolutely certain about the process that one has etched in his mind. Develop a rigorous approach that almost frees one from bias and misjudgment and then work at that process and fine tune it along the way. This is what I have been trying to do and I believe that it has worked for me. And perhaps, it will work for you too.
And part of my process involves looking at deep value companies such as Barratt Developments PLC where most fear to thread on especially in times of severe depressions. If one can incorporate some form of second level/order thinking into an investment process, I believe that one’s results will be better off than most. This will develop over time as per an investor’s experience. But in any case, focus on the process and the proceeds will follow.
Don’t take my word for it. Realize it yourself!
May all readers be blessed with abundance, health and happiness!