In their latest Q1 2022 Letter titled, Exploiting Volatility to Outmaneuver the Market, Miller Value explain how to exploit short-term volatility. Here’s an excerpt from the article:
We have great conviction in our process, which is both time-tested and unique. We are patient, long-term value investors. We value businesses and think like owners. We believe our long-term focus provides us a significant competitive advantage. It allows us to focus on signal over noise, and to position for high long-term, risk-adjusted return potential.
Our style remains highly unique in today’s market. In a market dominated by short-term optimizers, we believe our long-term focus is a significant competitive advantage. As algorithms trade every headline, we conduct careful analysis on business fundamentals and compare those to market expectations. As many prioritize minimizing volatility, we aim to make money for clients above and beyond what index funds can deliver. We like to use volatility in an effort to enhance returns.
These differences mean we can get out of sync with the market during “risk-off” periods. We think it makes sense to hold tight through the inevitable market volatility. The evidence is clear: there’s no reliable way to time markets.
Further, if you hold for the long term, you have great odds of making money. The market only rises a little more than half of days and 63% of months, but it gains 73% of years. On a rolling basis, it’s up 89% of 5-year periods, 93% of 10-year periods and 100% of 20-year periods since 1927!
It’s amazing that investors focus so much attention on the fool’s errand of calling recessions and timing markets! We choose patience. While it may be behaviorally challenging not to be sucked into the vortex of worries, we find such high odds of long-term success quite reassuring!
You can read the entire article here:
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