In their latest episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discuss Investing Is All A Mental Game. Here’s an excerpt from the episode:
Tobias: I think that’s very practical. The longer I do it, the more I think that that’s actually really true. I think there’re two things that you can do in the market. You can either buy things that are really, really undervalued and basically, you don’t pay for the equity, because you’re getting your balance sheet value, you’re getting cash, and other stuff in there.
Or, you find stuff that’s really, really good. Again, you’re trying to get optionality for free. Either those two things work really well. That’s what I try to do. I try to get both. I just want optionality in the portfolio. Then the thing about optionality is, there’s some randomness in it. You don’t know when it’s going to hit, but ultimately, it’s still holding these things like printing money, and buying back stock, and growing, and doing all the right stuff. You have your time. Your moment comes.
Bill: Yeah. All right, that’s how I invest. I’m just not sure I believe in it anymore.
Tobias: Yeah, it’s hard to believe it sometimes when you’re doing the right thing and it’s just running against you for years, start thinking that you might be nuts. It’s a mental game. It’s all a mental game.
Bill: I guess the reason I don’t want to index is I was really happy when my friend, [unintelligible [00:43:00] this week and I’m talking to him. I was like, ” Have you ever tried it on?’ They’re like, “Hate on them.” Yeah, fuck yeah. [unintelligible [00:43:08] I like that stuff.
Flows Work Till They Don’t
Jake: This same problem though exists, that flows dominate. That’s what we’re saying at the moment. But that same thing works on the other way, too. There will be a tough point, where you’re like, “Oh, my God, this business is amazing. Why does it just keep going down day after day after day?” It just doesn’t make any sense. The fundamental support a much higher price from here. Well, that’s the flows argument going the other direction. We only hit the right price on the elevator up and down. You just have to know where you are and play your game.
Tobias: I still think that the more distortion there is in the market, the better it is. The flows argument, I’m still now entirely on board with it, but even if it is the case, then I love it. Let’s do that. Let’s make sure somethings are massively overvalued and somethings are massively undervalued. I don’t care if it doesn’t necessarily show in portfolio performance in the near term, because I’m not trying to buy future performance. I’m trying to buy businesses that print cash flow and do stuff.
Bill: Just need to make sure the agency costs aren’t there.
Tobias: Yeah, that’s–
Jake: What do you mean by that? What does that mean?
Bill: I mean, there’s a lot of cheap stuff that’s just there to enrich management. They suck this stuff out, and you get this cash on the balance sheet, and you’re never going to see it just in some glass box. I always have an issue when– I don’t know. Facebook was a good example before they were doing their buyback. It’s like, “Well, look at all the cash.” It’s like, “Okay, well, that’s just Zuckerberg’s play chest.” That’s not yours. You’re just along for the ride and turns out he’s going to spend $100 billion on something that people, well, thinks he’s going to that a lot of people don’t agree with. [crosstalk]
Tobias: They’re doing some buybacks, too.
Tobias: They’re doing some buybacks.
Bill: Yeah, well, I think that I think it’s changed a little bit and I actually–
Jake: This is a fun game that-
Bill: Don’t have a same aversion.
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