[aaavl2821]

I went to columbia business school, where buffet is revered and the value investing program is the most exclusive and sought after program in the curriculum (and arguably one of the few that actually teaches useful skills). they publish a letter called graham and doddsville with articles and stock pitches from modern day value investors.

i didnt do value investing but took some classes and attended some talks, so i am not an expert, but from what i saw, things have changed a lot. it is harder to be a value investor today just because everything is so expensive. just like 50 years ago opportunities to buy businesses for less than book value became harder and harder to find, in today's market it is much harder to find value investments as defined by traditional valuation metrics like EV / EBITDA, ROIC, FCF / earnings yield, etc

Value oriented funds, and long / short equity funds in general, have been having a tough time. Too many funds popped up in the last 20 years and they are all competing for a few good investments. People are changing the definition of "value", though i am not sure if anyone has found a good one. Many people pitched FB and Google as value stocks, even though by traditional metrics they could not qualify as value investments

Bill Ackman, a prominent investor and sponsor of an investing contest that is a major part of the value investing curriculum, said if he was starting today he wouldnt be an investor, but would start a tech company. He wasn't the only HF manager who expressed that sentiment

[pmart123]

You know, I think the thing that is interesting is Buffett never really was as resolute in Dodd's philosophy as many of the famous long/short investors who have struggled recently seem to be. Buffet evolved as an investor:

1. He recognized the multiplicative power of combining the insurance float alongside his stellar investment ability.

2. He recognized the power of moat and brand value vs. Graham and Doddsville.

3. He saw the value in return on capital over purely P/E for a growing business from Sees Candy.

As an aside, one reason long/shorts have had a tough time is that low rates make it harder to generate an automatic 6% return on your short book.

But, I believe many value investors have failed to understand how technology and network-based platforms work. P/S works better for AMZN than P/E when the CEO is trying to minimize E. NFLX could have lower its P/E to 20 if it charged $15/month last December. FB just had to monetize its platform by something like a couple dollars per user right after it IPO'd. I think many traditional value investors did not understand or adapt their thinking regarding stickiness, revenue per user expansion, fixed costs for platform-based businesses, and redefining what tangible and intangible asset value is.

There's an almost stubbornness to many of these investors versus a curiosity to listen to an alternative viewpoint.