Why value investing works?
A piece on market behavior and why it benefits value investors in long term.
1. All promoters / business owners are value investors by nature. they like to buy low and sell high.
A businessman who can go to china or bangladesh to save INR 2 on a component or to save labour cost is not going to buy ₹500 book value stock of his own company in ₹1000, that too being in control and having all the insider info.
Its common sense.
For example
Tata sons bought tatapower and motors in Q1 2020 when they were undervalued.
On the other hand GMM and HUL (co) promoters sold their positions at ATH around the same period.
2. Buying peace in chaos is value investing-
it gives you proper sleep knowing that you have too little to loose.
When you are less anxious, results are likely to be better.
3. "Where there are no entelopes, there are no lions" - Thomas phelps.
It means stock manipulation is done in stocks which are Hot and trendy.
Manipulating a stock nobody is talking about almost impossible and thus saves you from stock price manipulation.
4. No problem of liquidity-
It is kind of self-explainatory, when you buy a lot of people are selling and when you sell huge no of people are ready to buy.
you can do high volume transaction.
5. Speculation proof-
When a very good news comes about a stock which is already overvalued, it moves very little but when a bad news comes, sharp recovery takes away all the returns. Opposite is true for undervalued stocks.
6. Media / SM literally work for you-
If you want to ride momentum after stock is already multibagger, you can. Just keep browsing media and twitter threads and you will know when is the best time to Exit.
Happy investing.