In his recent interview on WealthTrack, Rob Arnott discussed the courage needed to invest in value stocks. Here’s an excerpt from the interview:
Arnott: With value investing you’re always buying companies that are out-of-favor and unloved, so that’s one element that requires courage. Chasing the most popular and beloved companies is easy. Secondly, it goes against human nature. The newly cheap stocks got there by inflicting pain and losses, and it goes against human nature to say I want more of that.
Trimming your holding to newly expensive stocks goes against human nature because those companies created great profit and joy on the way to being very expensive. So human nature conditions us to run away from what looks fearful or fearsome and that goes back to our ancestry on the African veldt.
And yet success in investing often will benefit from embracing what seems to be dangerous, where the danger is already fully discounted in the share price.
You can watch the entire interview here:
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple: