Here’s a great interview with Bruce Greenwald on the Value Investing With Legends Podcast. During the interview Greenwald explains why old school value investors, who do not evolve, will disappear. Here’s an excerpt from the interview:
(36:01) Those three areas are what investment managers do. What portfolio managers do is risk management. I think that’s really the area in which value investing is changing the most. I mean this evolution in valuation from just pure simple asset values to asset value versus earnings power to franchise businesses and understanding those is what the good value investors have continued to do.
The ones that have got in trouble are the ones that just stuck with old asset values. But, if you do that evolution, you use it to guide intelligent active research you’re fine. But here’s the thing. If you’re going to be a specialist, you’re not going to be able to build a portfolio. So, if this is the way active investment is going, and I think it’s the way it’s got to go, cause these are the people that are going to be on the right side of the trade, you’re going to need somebody else to build portfolios, and actually, always needed somebody else to build portfolios.
Because if you think of an individual investor, most of their capital is in their job. It’s human capital. They have different industries they work in too. So if you look at their overall wealth, the portfolios are going to look different for every individual.
You can listen to the entire interview here:
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