Clyde Prestowitz: Cheap May Be Expensive

Value investors are on the lookout for inexpensive companies that have been misvalued by the market. But what if that core tenant of value investing may not always be the case?

That’s because several cultures follow the idea that a good that can be cheap is truly expensive. In the long-run, buying something inexpensive that needs to be replaced constantly may end up more expensive. In may be best to pay up in the first place.

This is why investors who focus on quality brands and buy when there’s a decent value can do better than those looking for an exceptional one.

This trend can also be seen with the global economy. Free trade looks like a reasonable bargain, as all parties seem to be better off over time. However, what works in theory may not work well in fact.

That’s because the assumptions about free trade assume a level playing field. But many governments subside some industries, and they may even punish others with high taxes and regulations. And many countries will be willing to push for exports to boost their own economy at the expense of those playing by the rules.

When all real costs are accounted for, free trade looks more expensive than it is. And those looking to invest internationally may have to factor those differences into account when making investment choices.

To read the full analysis, click here.