Tags
Benjamin Graham, buy and hold, catalyst, growth investing, growth vs. value, investment theme, Joel Greenblatt, multi-bagger, Philip Fisher, reading, survivorship bias, value investing, Warren Buffett
Ah yes, the great investing debate & divide…
At one extreme, we have the wild-eyed growth investor foaming at the mouth over a great story. A silky-tongued CEO’s painted unicorns & castles in the air, and our reckless plunger’s itching to dance the magic rainbow. No price is too high, no management too sleazy, no risk too great, to deter him from the boundless opportunity he now sees stretched out in front of him… His investing idol’s Philip Fisher, of ‘Common Stocks & Uncommon Profits’ – which I had the misfortune of re-reading recently. How this book was ever nominated a bloody investment classic, I don’t know!? OK, let’s grant some credit. Yes, I’m sure Fisher was a gifted investor, but he was also in the right place at the right time – in California, at the dawn of the electronic (& venture capital) ages.
So, who’s ever sat down & really studied his book, and actually figured out how to bloody implement his 15 Points? Who among us has the time, the means, the resources, or the determination to practice 95% of what Fisher preaches? And where in the book is the real secret exposed – the foresight to pick a 100 or even a 1000–bagger? That’s the problem people forget with growth investing – survivorship bias. Consider a buy & hold investor seeding his portfolio with a selection of promising growth stocks – some die off quickly, most turn out so-so, but maybe one (or two) actually grow & grow to dominate his entire portfolio. Of course, the losers are long forgotten, and he’ll nod wisely & tell you he always knew the real winners! Or how about the chancer who bought a single long-shot stock…and ended up making a friggin’ fortune?! Well yes, he’s obviously a media darling now. But where are the stories about his fellow slobs who bet the ranch & lost everything? Well, like I said, the losers are long forgotten…
Not to mention the fact share prices of even the biggest winners usually suffer some pretty sickening plunges along the way. Of course, every growth investor’s confident he won’t be the sucker shaken out of his wonder-stock’s long-term parabolic trajectory by a mere trading blip. Learn from Black Monday ’87, he savvily reminds you – it’s a mere blip on the charts now! Yeah, but the average investor wasn’t calling it a blip then – he was too bloody busy selling…
Wexboy 