In a world where momentum and technology stocks have dominated the markets for the past decade, the principles of value investing have often been overshadowed.
However, as Prem Watsa, the renowned investor and CEO of Fairfax Financial, pointed out in a 2019 interview with the P/V Podcast, history suggests that patience and discipline in value investing still pay off in the long run.
Reflecting on the aftermath of the 2008 financial crisis, Watsa remarked, “In the last 10 years since that 2008, 2009 crash—call it the great financial crash—value investing basically, I think, one, maybe two years we’ve had that value-oriented stocks have done well compared to momentum.”
His observation highlights a key challenge for value investors: the long stretches of time when the market seems to reward speculative growth over fundamentally sound businesses.
The dominance of technology stocks, particularly the so-called FANG stocks, has further tested the resolve of value-focused investors.
Watsa acknowledged this trend, saying, “The FANG stocks and high technology stocks have done well. They don’t have to make any money, it seems, and they continue to finance at higher valuations.”
This sentiment resonates with those who have watched tech giants defy traditional valuation metrics, raising questions about sustainability.
Despite these challenges, Watsa remains steadfast in his belief in value investing. “The long history of the stock market shows that value investing pays off. You have to be patient. You have to take a long-term viewpoint,” he explained.
His perspective is a reminder that market cycles are unpredictable, and trends that seem unstoppable eventually fade.
Watsa also drew parallels to the dot-com bubble of the early 2000s, a period when euphoric investors drove tech stocks to astronomical levels before the inevitable crash.
“It seemed like these companies would go through the roof. Of course, they suddenly hit the wall and came down 75, 80%. And some of them disappeared,” he recalled. The lesson is clear: speculative excess often ends in painful corrections.
For Watsa, the essence of value investing remains unchanged: buying strong businesses at fair prices. “We just think value investing—where you’re buying something, a dollar for 50 cents, is the expression—good companies run by good, honest, hardworking presidents, CEOs. And you’re buying them at fair prices. We think over time, that should work.”
His words serve as a powerful argument for resisting market fads and staying committed to sound investment principles.
While the past decade may have challenged value investors, history suggests that fundamentals eventually matter. As Watsa reminds us, market cycles turn, and those with the patience to endure volatility and focus on intrinsic value will ultimately be rewarded.
You can read a transcript of the interview here:
Prem Watsa Interview – The P/V Podcast
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