About That Nagging Feeling That You're Missing Out
Much of the tension between economists/policy-makers/globalization theorists and global value investors can be understood this way. They see a globalizing macroeconomy with interconnected but fragile financial systems, while we see a rising sea of new companies that are wildly mispriced.
We are witnessing the breakneck chaotic development of half the planet's markets and their collision with the Western economies. At the company and asset level it is pure chaos, which is great for value investors. If China is building the equivalent of one to two Chicagos per year, how can this not create huge market inefficiencies? The pure scale and complexity of the activity, combined with erratic investor behavior, guarantee mispricings.
But many value investors, the experts at identifying such mispriced value, are conspicuously quiet. How can a Marriott spin-off be an exciting market inefficiency and the chaotic development of half the planet not be? I suspect more and more Western-based investors, staying strictly in their home markets, have a quiet nagging feeling that they are missing out.
I suspect that if Graham were looking at this chaotic sea of rising companies, he would see a world of opportunity. My guess is that he would mostly ignore the rampant theories of globalization and stay tethered to the concept of value. He would examine the fundamentals of companies around the world and build an investment methodology from the bottom up. Instead of going big and thinking macroeconomics, I think he would have gone small and thought of fundamentals.
Graham might also have seen it as a great intellectual challenge—a chance to understand a truly new and singular event in human history—the emergence of a global world. And instead of limiting oneself to the opportunities current strategies could capture, why not try to retarget the largest inefficiencies this event offers? This book, and much of my last decade, is my best attempt at this type of approach to the newly arrived global landscape—a de novo reapplication of fundamental value, learned on the ground and in the trenches around the world.
The investment strategies presented are the result of de novo reapplication of value and specifically target what I believe is the core "going global" problem: how to invest long-term in inherently unstable and uncertain environments. I call the resulting strategies value point. It is a logical extension of well-known value techniques and, hopefully, easily recognizable to most readers. It also explains most of the successes I have witnessed of Western firms going global—as well as the startling rise of developing market tycoons such as Carlos Slim and Prince Waleed. It is an action plan for profiting in a colliding world.