Bill Nygren: Value Investing Requires Zigging When The Consensus Is Zagging

Johnny HopkinsBill NygrenLeave a Comment

In his latest market commentary titled – The High Price Of Low Volatility, Bill Nygren explains why value investing requires zigging when the consensus is zagging. Here’s an excerpt from the commentary:

Nygren: Value investing requires zigging when the consensus is zagging.

We believe that index fund investors have become blind to the concentration risk that has crept into their portfolios. Further, we believe that investors who think they are decreasing their risk by buying low volatility stocks are blind to the valuation risk they are taking.

We believe that owning cheap stocks that have become more volatile and sizing them based on their attractiveness rather than their market capitalization not only reduces our risk of loss but is one of today’s most attractive opportunities.

We expect that eventually, the premium investors pay for low volatility will diminish, and we would expect our Oakmark portfolios to again become less volatile. But while we wait, as Warren Buffett said, “We prefer a lumpy 15% return to a smooth 12%.”

You can read the entire commentary here:

The High Price of Low Volatility

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