Most readers of this article will already be quite familiar with the theory of efficient markets which contends that the stocks that trade in the public markets are always fairly valued as the markets act “efficiently” to incorporate all of the information available into the price of any given stock at any given moment. However, if that contention were correct, there would have been no place or success for famed value investors such as Benjamin Graham, Warren Buffett (Trades, Portfolio), John Templeton and David Dreman (Trades, Portfolio).
These men, along with scores of others less known, made huge fortunes by having the patience to wait until they were presented with the opportunity to acquire extraordinary brands and businesses at unjustly depressed values. They were able to look beyond the short-term pessimism and emotionally driven fear that drove share prices to absurdly low levels and then, as the legendary Jim Rogers described it: “I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.” Warren Buffett (Trades, Portfolio) once was quoted as stating: “My investment style is best described as lethargy, bordering on sloth.” Continue Reading »