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by ThrustVectoring
2866 days ago
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More of Buffet's success was from Bet-Against-Beta than from value investing. Lots of investors are liquidity and leverage constrained - many mutual funds cannot exceed 100% exposure to stocks. If they buy a stock portfolio that participates less in both bull and bear markets, they wind up underperforming over the long run. Buffet, on the other hand, regularly buys up these low-volatility companies using borrowed money. If you take something that behaves like 80% of the S&P 500 and lever it up 125%, you'll get the performance of the S&P 500. But the 80% S&P 500 stock is cheaper than it "should" be, so you wind up over-performing instead. |
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