Millennial Money: How Young Investors Can Build a Fortune by Patrick O'Shaughnessy

Millennial Money: How Young Investors Can Build a Fortune by Patrick O'Shaughnessy

Author:Patrick O'Shaughnessy [O'Shaughnessy, Patrick]
Language: eng
Format: epub, mobi
Publisher: St. Martin's Press
Published: 2014-10-14T00:00:00+00:00


Rule #4—Value

In Botswana I met a tracker named Super whose background was very mysterious. He was an expert in tracking game in the Kalahari Desert, where in the very dry winter—when food is scarce—game is very hard to come by. He was so good because he was patient and experienced, and had remarkable eyesight—“like a meerkat.” Even though he was elusive, my brother-in-law and I kept trying to pry into his history, because we figured that only a very interesting path could have led him to his current job and skill set. Then one night, the topic of American football came up and he mentioned how badly he wanted a football to toss around. He was well over six feet tall, strong, and had very long arms, so we asked him how far he could throw a ball. He replied “if we all had a throwing contest, I would win.” We were a little dubious because my brother-in-law played football in college and had a pretty damn good arm, so we challenged him. Thank God we did because after throwing a rock farther than we could see, he told us about his training where he learned “the hard way” how to survive and track in the bush. He told us that he knew the key spot to attack on every animal to kill it instantly. The hippo, for example, has a soft spot on the roof of its mouth that is only accessible to a spear when the hippo is charging you, mouth open, and is seconds from mauling you to death. He had similar stories for how he’d killed charging buffalo, ostrich, and antelope. In our eyes, Super jumped from an interesting guide to a legend—he had faced intense fear and emerged stronger.

I am sure that anyone would share our awe at Super’s stories—even if they were embellished or untrue—because we love the idea of facing our fears rather than running from them. The same holds true in the investing world, where the great legends have succeeded because they have faced market fear, buying when all others were terrified by the market. John Templeton was fond of buying at “points of maximum pessimism” because the prices associated with pessimism were so attractive. Saying you will buy low is one thing, but actually buying in the face of wildly negative market sentiment is another thing altogether. It is the market equivalent of standing one’s ground against a charging hippo. Templeton was also famous for buying out-of-favor companies as the world plunged into World War II in 1939. He bought 100 shares of every company (all 104 of them) trading below a dollar. His purchases in a time of fear netted him a fortune.15

Value investing is all about buying in the face of fear, pessimism, and negativity, and it is value that is the most crucial piece of the Millennial Money strategy. The attributes I’ve discussed to this point are important, but it doesn’t matter how great a company is if it is overpriced.



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