Odd Lots A Value Manager on How Most Value Managers Are Getting It All Wrong
Feb 18, 2021
Rafael Resendes, co-founder of Applied Finance Group, shares his insights as a portfolio manager specializing in value investing. He discusses the struggles value managers face with traditional metrics, emphasizing the need to rethink what 'value' means in today's market. Resendes highlights the significant role of intangible assets and critiques the reliance on historical data. He argues for a systematic approach to valuation that goes beyond mere cheapness, illustrating his points with real-world examples, particularly from the tech sector.
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Value vs. Cheapness
- The term "value" has been hijacked by cheapness metrics like book-to-price.
- True value investing focuses on a company's intrinsic worth, not just its current price relative to a metric.
Shift in Finance Focus
- Empirical finance has shifted focus from intrinsic value to market efficiency and price movements.
- This shift has driven security analysis out of finance and into accounting departments.
Monster Beverage Corp: A Wealth Creator
- Monster Beverage Corporation is a classic example of a wealth compounding company.
- They consistently earn high returns above their cost of capital and reinvest in high-growth opportunities.