Value Walk: Long-Duration Investing – Not the Cool Kids
Markets have changed rapidly. After being popular in the past decade, technology stocks aren’t the massive return plays that they used to be.
That’s a shame, as that long period of strong performance led to many investors moving towards these stocks. As a result, they ended up under investing in value plays. Today, with tech stocks down heavily, investors are sitting on far greater losses than they would have otherwise faced.
Meanwhile, long-duration investors, who look at companies that are less risky and carry a higher margin of safety, are having a rare moment in the sun. These investors tend to outperform the up-again, down-again growth investors over time. But that’s the key phrase: over time.
In today’s market, looking at a stock as a fraction of a business rather than a surefire ticket to higher prices may regain some of its popularity.
That could mean investing in companies that sound boring, but spin out reliable cash flows as a business. That could include still-undervalued energy stocks, like Occidental Petroleum (OXY). As tech stocks crashed last year, Warren Buffett quietly lined up the ability to buy half the company.
Historically, Buffett’s big buys are made gradually – right before an offer to buy the other half he doesn’t own. Investors have a potential for solid returns right there, even if it doesn’t sound as exciting as a tech play.