I’m very glad we have held Peloton ($PTON) on the ROIC Big Board since around $55 per share. Already almost a triple-bagger, it will go down as one of our best calls in our track record. See #3 for context on why $PTON stock popped today.
I am also releasing stock analyses on Netflix ($NFLX), AT&T ($T), and Disney ($DIS) this week for ROIC members, so keep an eye out for those write ups.
To continue part two of our ROIC Investing Strategy…
Pure value investors tend to get bogged down by valuation details and dogma and thus get “lost in the trees”…
- Return profile: If you look at traditional value investing, most investments are based around mature or declining companies being undervalued by 20-50%. This game is all about having a good batting average through the years.
- Unaware of bigger picture: Many value investors focus so much on company-specific thesis points that they miss the bigger picture. Many of these very smart investors were the ones that bought undervalued retailers only to underappreciate the e-commerce trend and get steamrolled.
- Dogmatism: Value investors are usually the slowest to pounce on opportunities because of their wariness of bubbles and overexuberance. They are also highly educated and susceptible to scoffing at new trends or ways of thinking that deviate from what they learned at Harvard Business School.
- Work required: It is extremely hard to find stocks that are discernibly undervalued by 100%+. Thus, many of the attractive stocks that a value investor can find are 20-30% undervalued. That means that a value investing strategy requires lots of work constantly finding new undervalued companies and flipping between them. Finding and flipping between 13 different stock opportunities is much harder and more time-consuming than finding one company that will grow and compound 20x over a decade.