The Rotation To Value Is Inevitable
In late 1999, it was stated that “investing like Warren Buffett was the same as driving ‘Dad’s ole’ Pontiac.” The suggestion, of course, was that “value” investing was no longer a viable investment strategy in the new “dot.com” economy where “growth” was all that mattered. After all, in the “new world,” it was indeed “different this time.”
Less than a year later, investors wished they had adhered to Warren Buffett’s strategy of buying value as the “Dot.com dream” emerged as a nightmare for many unwitting individuals.
However, it wasn’t just stocks either. In 2007, individuals were chasing the “momentum” in the real estate market as individuals left their jobs to pursue riches in housing and were willing to “pay any price” under the assumption they would be able to sell higher. Of course, it was long after then Fed Chairman Ben Bernanke uttered the words “the subprime market is contained,” the dreams of riches evaporated like a “morning mist.”
As Warren Buffett once quipped, “price is what you pay, value is what you get.”
Throughout market history, investors have repeatedly abandoned this simple principle during periods where bull market advances seemed to defy logic. Ultimately, those investors paid a dear price for their speculation as the reality of “overpaying for value” led to poor financial outcomes.