Investing in the stock market doesn’t need to resort to the binary extremes of Fool’s Gambit and Market Timer’s Gambit. There is a different game available: One Stock at a Time. That is the game we play at IMA.
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Even in this insanely overvalued market not all stocks are overvalued and in search of a greater fool.
Armed with patience, a long-term time horizon and our time-tested value investing process, we patiently look for high-quality companies, run by great management, that are significantly undervalued (i.e., have a margin of safety).
This process is not fast and furious and won’t get you rich quickly. It requires a lot of mundane work and turning over a lot of rocks.
We read company financial filings, talk to management and competitors, build our own financial models, and debate these investments among ourselves and with our global network of investors.
We only need 20 to 30 stocks – there are tens of thousands of stocks globally. When we cannot find enough stocks that meet our stringent investment criteria, our cash balances go up. Then they decline again as we find new stocks.
We don’t time the market; we value individual stocks, buy when they are cheap and sell when they are dear.
Let’s sum it up. The market today is a $1 bill trading for somewhere close to $2 or more. Many stocks in today’s market are $1 bills changing hands for $4, $6, $20. But we don’t own the market; instead we have assembled a portfolio of $0.30 to $0.60 dollars, one stock at a time.
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