Saturday, May 29, 2010

New Era Value Investing: Chapter 10

As the chief investment officer at Fremont Investment Advisors, Nancy Tengler employed the value approach she describes in her book, New Era Value Investing.

In this chapter, Tengler discusses why an emotionless approach to investing is important. She describes 7 learning points she has picked up, the cognizance of which can help investors improve their returns:

1) Wall Street tends to extrapolate current trends to infinity

In the mid-1970s, when the US economy was mired in a prolonged recession, it seemed to many as if the US would never again enjoy prosperity. In the late 1990s, it was believed that recessions were a thing of the past.

2) It is rarely "different this time"

One of the biggest challenges faced by investors is being able to resist popular assumptions that stock markets will behave differently as a result of new forces.

3) Market pullbacks are great investment opportunities

Certain industries and sub-industries can become out of favour, but often unjustifiably so.

4) Go with your research, not Wall Street's

The best time to invest in a stock is when analysts are down on it.

5) Investment managers need to challenge their beliefs every day

Feeling uncomfortable about an investment is good, because it makes the investor search for more facts, keeping an open mind.

6) Use the financial media to your advantage

The "always-on" media can exacerbate declines, creating opportunities for those who remain disciplined.

7) It's all relative

While Graham and Dodd focused on absolute returns, Tengler argues that its relative valuation that matters


Anonymous said...

Why are you pushing this dated, second hand research from a woman who left the financial services industry in disgrace 8 years ago? She nearly bankrupted the last firm she ran.

Saj Karsan said...

It doesn't mean we can't learn anything from the book, but thanks for posting that link, that's good to know