During his recent interview with CNBC, Seth Klarman explains why investors should forget about the definitions of growth stocks and value stocks. Here’s an excerpt from the interview:
Klarman: The academic definition of value is buy the stock that’s cheapest by the numbers.
But I don’t think that’s what Graham & Dodd wanted.
In fact it’s clear that they were talking about earnings power, and the growth possibilities in a business, even if they’re hard to determine.
And so I think value has to be determined for every company. The way I think about the market is, not that there are growth stocks and value stocks, but rather that all stocks may hold value. But that all stocks also could potentially be overvalued.
You have to have a mechanism, a rubric for figuring out the value of different kinds of assets, different kinds of businesses, and then figure out which ones are trading particularly mispriced.
You can watch the entire discussion here:
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