There’s a type of bamboo that has an uncommon growth pattern – the Giant Timber bamboo.
If you water this bamboo in the first year, nothing happens. If you water it the second year, nothing happens. If you you water it in the third year nothing again happens. However, if you water it in the forth year, it will grow 90 feet in six weeks.
Value investing is similar to this bamboo tree in that it doesn’t constantly provide immediate gratification. Even if you keep working hard for years without having to worry about visible results, keep on keeping on because you're building solid as well as resistant roots which will pay off in the long term.
Many of you know that Walter Schloss smashed the market over a 47-year period. What people don’t know, however, is the fact that there was a 10-year period where he underpreformed the market. From 1989 to 1998, the S&P index crushed Schloss.
Stop and reflect on that. Can you identify one investor, friend or family member that would realistically stick with the same strategy that for 10 years lost to the market? How would you stay with a money manager if he underpreformed that many years in a row?
I know of some investors who would switch their own strategies if they underpreformed for six months, let alone 10 years.
However, not Schloss. He keep watering his bamboo, drought after drought. He stayed strong, he persisted and shazam! Not only did he have four astounding years that followed that decade of anguish, but those four years erased the losses from the previous 10 years combined!
No matter whether it's life, football or value investing, you have to keep watering the bamboo – eventually it will grow for you.
"Value investing works because sometimes it doesn’t." – Joel Greenblatt