Value investors always talk about having a margin of safety by investing in companies that are liquid and are bought at undervalued prices. Would this margin of safety have prevented Buffet or Graham from blowing up during the 1929 crash?
1) No. "Undervalued" stocks can still decrease in price, regardless of anyone's subjective interpretation of company "fundamentals". 2) If you really have a lot of free time on your hands, you can find out which companies were the "best performers" during each of those years and enlighten the rest of us with that info.
Most "value investors" don't know what they're doing. So no, they got creamed. Same thing now. (Including Warren and his financial buys)
It depends on a few things. Your timeframe How much leverage you are using The quality of the company you are buying The price you pay If you are building a long-term portfolio, using cash. And buy a solid business that generates tons of cash, has a dominant competitive position, pricing power with sound economics at a low price, why would you âblow upâ unless you panic and sell out? Right now will prove to be one of the best buying opportunities in generations. Sure, earnings at many companies are about to get crushed and the market may go lower and significantly so but at the moment there are many companies on sale at bargain prices. Iâm finding many selling below net cash, selling with high Free Cash Flow/ EV yields, low price to equity etc, etc⦠Itâs something that has to be looked at on a company by company basis and right now value investors are salivating!
Value investors can have too much confidence in the "value" that they hope and believe that they are buying. It can increase the likelihood of large losses when the "investment" doesn't work out and then it becomes necessary to "panic and sell out" only after taking a lot of heat on the trade.