Business

Whtiney Tislon – I Am No Longer A Value Investor, “I Now Consider Myself A “make money investor”

Whitney Tilson‘s email to investors discussing his new webinar on his investment strategy called the “Make Money Investing.”

New Webinar this Thursday

I am no longer a value investor – at least not in the classic sense. But I’m certainly not a pay-any-price-for-growth investor. Rather, I now consider myself a “make money investor.” I still care about valuation, but am much more focused on business quality and growth rather than only owning stocks that look cheap based on traditional metrics. For most of my career, I had this backwards and it cost me and my investors dearly.

I’ve been developing my thinking on this topic over the past few years and finally wrote it down and delivered it in a 124-slide presentation I gave last Wednesday at the annual Stansberry Research Conference in Las Vegas. In it, I critiqued both value and growth investing and showed, using 30 company case studies, how I seek to take the best of both to maximize long-term gains as well as minimize the risk of permanent loss of capital. I concluded by sharing my analysis of my three favorite stocks right now, Alphabet, Facebook and Howard Hughes.

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I’ve posted a 36-slide summary of the presentation.


The Best Of Value And Growth: Make Money Investing

I Was An Old-School Value Investor

  • I pray in the church of Graham, Dodd, Buffett and Munger
  • I’ve been to the last 21 Berkshire Hathaway annual meetings
  • I’ve co-authored three books on value investing:

Poor Charlie's Almanack

More Mortgage Meltdown

The Art Of Investing

I Bought Cheap Stocks

  • As a value investor, I mostly owned stocks that were trading at low multiples of sales, earnings and/or book value
  • In most cases, the stocks were cheap because the companies were performing poorly
  • I cared about businesses’ quality and future growth prospects, but this was secondary to whether their stocks were cheap

The Four Mistakes Of Value Investors

My focus on cheap stocks led me to frequently make four mistakes that are common among value investors:

  1. Investing in low-quality businesses whose stocks were value traps because the businesses’ fundamentals continued to decline
  2. Failing to buy high-quality businesses whose stocks were fabulous long-term compounders
  3. Selling the stocks of great companies way too soon because they’d risen and didn’t appear as cheap
  4. Failing to understand/appreciate powerful new technologies/trends

How A Company Performs Over Time Is More Important Than Current Valuation

  • I estimate that 75% of what matters in terms of a stock’s performance over time is how the company performs vs. only 25% the valuation at the time of purchase
  • For my entire career, I had this backwards

This was a terrible mistake that cost me and my investors dearly!

The Four Mistakes Of Growth Investors

So the message is: “Just buy the stocks of great growth companies irrespective of valuation”? Not so fast…

Growth investors frequently make four mistakes:

  1. They overestimate future growth, forgetting the powerful force of reversion to the mean, driven by technology changes, new competitors, size acting as an anchor to growth, etc. Trees don’t grow to the sky
  2. They pay too high a price for a stock, such that even if the business performs well, the stock doesn’t
  3. They fall in love with great companies and fail to sell when they should
  4. They get sucked into “story stocks”

I’m Now A Make Money Investor

  • I now combine the best aspects of both value and growth investing to maximize my returns as a make money investor
  • I want to teach you how to become one as well

Lesson #1: Stocks Tend To Follow Earnings So Focus Primarily On Business Quality And Growth, But Beware Of Extreme Valuations

High Valuations Haven’t Mattered For Certain Stocks

Case Study: Costco

A 25-bagger since 1994, driven by extraordinary profit growth

Make Money Investing

10 Source for all charts in this presentation: CapitalIQ


I’m going to present my slides again in a webinar this Thursday from 7:00-9:00am ET. I will go through the entire presentation in ~75 minutes and then will take questions for the balance of the two hours. It will be recorded and made available to all registrants on a password-protected site.

Use “VW10” for a discount!

This is the first time we’re doing a webinar of one of our full teaching modules, so we’re pricing it at only $95 (the price is the same whether you join live or just watch the video afterward).

I hope to see you then!

Best regards,

Whitney

PS—Here’s an example of a free webinar we did a few months ago, The Rise and Fall of Kase Capital (41 minutes).

PPS—Going forward, this presentation will be incorporated into our Lessons from the Trenches: Value Investing Bootcamp, which we will next be teaching over nine 2½-hour sessions every weekday morning from 7:00-9:30am ET starting three weeks from today (Monday, October 29). For more information about this and our other programs, please go to www.kaselearning.com (please let me know if you want to register and I’ll send you a discount code).

Please use “VW10” for a discount!