attributes of value investing

An important attribute shared by most value investing approaches is the rational perspective of taking a long-term view. This is critically important, because it is all too common that undervalued common stock investments do not tend to perform well over the short run. This is simply because, as a general rule, you will not find undervalued investment opportunities in popular stocks (companies). Common sense dictates that stocks only tend to become undervalued when they are simultaneously unpopular, at least temporarily. It is generally this unpopularity that creates the short-term discrepancy between fundamental value and stock price.

However, the greatest success derived from value investing happens when the company’s stock price is dropping even when the fundamentals of the company continue to remain strong. Therefore, the key to implementing a profitable value investing transaction is to learn to focus on and trust the fundamentals supporting the business. In the same context, this also means adopting the conviction to not trust, and even the willingness to ignore poor short-term price action. Accomplished value investors understand that stock prices can lie, at least over the short run. But more importantly, accomplished value investors also understand that in the long run, fundamentals matter most.

Consequently, successful value investing requires a level of patience that unfortunately many short-term oriented investors do not possess. However, the rewards from investing in a truly undervalued stock can produce powerful long-term returns for the rational value investor who is capable of engaging in intelligent patience. But even better yet, those powerful long-term returns are generated at reduced levels of risk relative to other common stock investing strategies.

-- Chuck Carnevale

Jeff Bezos now fourth richest

Jeff Bezos has jumped past Carlos Slim on Bloomberg's Billionaires Index, making him the fourth-richest person in the world thanks, in part, to a 113-percent rally in Amazon.com Inc. this year.

Bezos made the leap by increasing his fortune 103.5 percent in 2015 as Amazon's profits ballooned and its cloud storage business also grew, according to Bloomberg Business.

"The 51-year-old founder of the world's largest online retailer passed the Mexican telecommunications tycoon Tuesday after Amazon rose $4.19 by the close of trading in New York," the publication wrote. "Bezos commands a fortune of $58.2 billion, according to the Bloomberg Billionaires Index. Slim, who was the world's richest person as recently as May 2013, is now ranked fifth with $57.2 billion."

Bloomberg Business stated that Bezos passed the Koch Brothers, Charles and David, last month on the index to become the third-richest person in the United States. The brothers, who each hold a fortune of $52 billion, control 84 percent of Koch Industries.

"The move caps what has been an incredible year for Bezos' net worth, as investors have piled into Amazon stock as a result of its successful cloud services business," Fortune magazine's Chris Matthews wrote in October when Bezos passed the Koch brothers. "[He] has added $22 billion to his net worth in 2015, the most of anyone on Bloomberg's list."

Bezos was ranked No. 15 on Forbes' original 2015 list of the world's billionaires, but has since jumped to No. 5 on the magazine's real-time rankings, behind Slim.

On that list, Bill Gates is ranked No. 1 with $79.2 billion, followed by Amancio Ortega with $74.7 billion, Warren Buffet with $63.3 billion, and Slim with $59.9 billion. Bezos' fortune is listed at $58.9 billion there.

*** [7/25/16]

Bezos passes Buffett for third place

The Jeff Bezos infographic

traits of great investors

Trait No.1 is the ability to buy stocks while others are panicking and sell stocks while others are euphoric. Everyone thinks they can do this, but then when Oct. 19, 1987 comes around and the market is crashing all around you, almost no one has the stomach to buy. When the year 1999 comes around and the market is going up almost every day, you can’t bring yourself to sell because if you do, you may fall behind your peers. The vast majority of the people who manage money have MBAs and high IQs and have read a lot of books. By late 1999, all these people knew with great certainty that stocks were overvalued, and yet they couldn’t bring themselves to take money off the table because of the “institutional imperative,” as Buffett calls it.

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And finally the most important, and rarest, trait of all: The ability to live through volatility without changing your investment thought process. This is almost impossible for most people to do; when the chips are down they have a terrible time not selling their stocks at a loss. They have a really hard time getting themselves to average down or to put any money into stocks at all when the market is going down. People don’t like short-term pain even if it would result in better long-term results. Very few investors can handle the volatility required for high portfolio returns. They equate short-term volatility with risk. This is irrational; risk means that if you are wrong about a bet you make, you lose money. A swing up or down over a relatively short time period is not a loss and therefore not risk, unless you are prone to panicking at the bottom and locking in the loss. But most people just can’t see it that way; their brains won’t let them. Their panic instinct steps in and shuts down the normal brain function.