Traditional value investing doesn't work anymore - Damodaran

Discuss

I think there is some merit to the idea... think of how books like "Built to Last" don't apply anymore. In the NSE, there are many stocks trading below their book value... but it would take years for the market to catch up, during which time that cash could have been invested elsewhere.

29/05- stick to the old ways of valuation. https://blogs.cfainstitu...d-19-go-back-to-basics/

30/05 -old style valuation doesn’t work....

But digging deeper in to other dissections of what this guy has said in the past few days, one thing I get is he says book value has become irrelevant

That's why I said it is a "Lazy Headline"

BV may not be captured accurately due to many things eg valuation, accounting standards, "value" of intangibles, franchises, perception, etc.

Except for a business with lots of real assets and cash-equivalents, BV is not a great metric to use.

Even for real assets, it can be problematic. Machinery valued at KES 1bn = scrap if the factory shuts down for a while e.g. ARM, Mumias, etc.

A mall which is partially empty isn't worth what it cost to build e.g. pick a number of malls...

UNIVERSITY OF WEALTH CREATION

Prof. Abletor Sedofia from University of Ghana.
"Academic excellence is overrated! Did I just say that? Oh, yes, I said it.
Being top of your class does not necessarily guarantee that you will be at the top of life. You could graduate as the best student in Finance but it doesn't mean you will make more money than everybody else. The best graduating Law student does not necessarily become the best lawyer. The fact is life requires more than the ability to understand a concept, memorise it and reproduce it in an exam. School rewards people for their memory; Life rewards people for their imagination. School rewards caution; Life rewards daring. School hails those who live by the rules; Life exalts those who break the rules and set new ones. So do I mean people shouldn't study hard in school? Oh, no, you should.
But don't sacrifice every other thing on the altar of First Class. Don't limit yourself to the classroom.
Do something practical.
Take a leadership position.
Start a business and fail; that's a better Entrepreneurship 101.
Join or start a club.
Contest an election and lose; it will teach something Political Science 101 will not teach you.
Attend a seminar.
Read books outside the scope of your course.
Go on missions and win a soul for eternal rewards...
Do something you believe in!
Think less of becoming an excellent student but think more of becoming an excellent person. Make the world your classroom!"

There are several threads on this forum by people like Stocksmaster proving that value investing works. Most of us guys just don't know how to find value. That's the problem.

However, I think value investing is a lot harder in first world developed markets because there are too many hedge funds and professionals with billions of cash looking for value. That makes it a lot harder to find.

You are trying too hard to make a point that's not there.
"first world markets shenanigans" is exactly that. FIRST WORLD. Sisi ni 3rd world.

Does the USD affect Kenya? Yes. We export/import in USD but the LOCAL basic trade is mostly in KES. Sure many of our inputs may be priced in USD but that's just a common medium.

Is there an attempted peg to the USD by CBK? I think it's probably more of a basket including the Euro. Look at the rapid move from 100 to 108.

Are we (most of us) buying Kenyan (or regional) firms? Yes. What GoK is issuing (via) CBK is what affects us.

"Simply incredible that you think that what the Fed does has zero impact on Kenya" WHO said that it has ZERO impact?
Kenya is not the USA.
Just as Singapore is not the UK.
Just as India is not China.
Different dynamics.
Kenyan banks get 11-12% of KES gilts. US banks get 0%-0.25% in USD.

The US Stockmarket has done very, very well from 2008-2020.
In the same time period the NSE has fared rather poorly. Exclude Safaricom and it gets worse.

As a VALUE investor in Kenya, why should I panic about what the Fed is doing to boost the US economy?

I think you guys are getting a bit sidetracked... the question is whether value investing is still a legit strategy. Look at companies like Fahari or Centum... the NSE right now doesn't value these firms at all on a book-value basis.. So, how many years would it take for the market to reflect these companies' value? Versus how much money you can take applying capital elsewhere? We can't all wait 30 years to make back money from an investment. It can happen anywhere, Kenya, USA, or Hong Kong.

Value investing isn't a "US" strategy. It has been around for as long as investing has.

My grandfather probably never heard of the term "value investing" but he knew value when investing.

Stop trying too hard to get people to sign onto programs/training that offers lessons in "Technical Analysis" at a fee.

Buffett for many years has used "Intrinsic Value" as the measure vs BV.
See's Candies has little BV but a huge "Intrinsic Value" from branding/trust/locations, etc.

Apple, Microsoft, etc has a high P/B given their "assets" aren't easily valued.

I look at ROI on my entry price but I do consider some on a BV basis e.g. Kenya Re given the current assets on hand.

Fahari's "assets" may be over-valued by them and their advisors in this market. I believe the INTRINSIC VALUE is lower than their BV.

Centum's BV is based off valuations so it may make sense BUT I would further discount their real estate holdings based on the current market conditions.

No 2 firms are the same but one can make comparisons within sectors.