Whitney Tilson From The Value Investing Congress (2008)

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Whitney Tilson From The Value Investing Congress (2008)

In the spirit of the upcoming Value Investing Congress which I plan on attending and reporting from, I found some interesting videos from the previous Congress in 2008 which I wanted to share. I discovered a total of 11 videos on the internet. Most of them are quite interesting, and informative.

I wrote about a brief summary of each video which I will be posting over the next few days, and embedded the video below.

It is important for context to understand that the conference took place in late 2008 at the height of the financial crisis.

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The Value Investing Congress  was held at the Darden School of Business over a span of three days.  This video is an introduction explains what Darden students can expect from the various different presentations on the economy and what to expect in the future.  Whitney Tilson is the speaker chosen to introduce value investing and what exactly it is.  Tilson defines value investing as attempting to buy a stock or financial asset for less than it is worth.  On the contrast side of growth investing, which means to sell a stock for a greater price then it is bought, while they are on contrasting sides, growth investing in a component of a successful value investing portfolio.

 

The two principles of this value type of investing are intrinsic value and margin of safety.  Intrinsic value is determining what something is really worth.  This means what a rational cash paying buyer would pay to own this asset.  Intrinsic value also defines what the future free cash flow that the owner will accumulate over the investment.  The second principle is margin of safety.  Once you have come up with a range of the value of a stock or financial asset, you will need to analyze the margin of safety with your predictions of the future by picking the midpoint of the range you have calculated.  This margin gives you a safety net and you will not have a permanent loss of capital.

 

Tilson goes on to teach about how to evaluate stocks.  The investor should understand the company and industry to better project the future performance of this stock.  This is referred to as a circle of competence.  The worst mistake an expert investor can make is thinking they know much more then they do about immerging companies.  The investor should then evaluate the industry the company serves.  Lastly, you will need to research the management department of the company itself.  The CEO should have good operational skills and training in capital allocators.  With a management team who has a great operational background and knows how to allocate capital, you can expect to earn from your value investment.

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