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The Values of Value Investing

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This article has been in the works since last November. It started out as a speech I gave to the Swiss CFA Society. To me it is an important framework for understanding value investing. I think the rise of the consulting industry, armed with cheap computing power and an abundance of stock-specific data, has harmed the industry, because according to them, a “value” investor is one who holds statistically cheap stocks and a “growth” investor is one who holds statistically expensive stocks. The truth is somewhere … well, actually it’s a lot more complex, and the consulting industry’s crude segmentations don’t capture it. – Vitaliy

The Values of Value Investing

I organize a conference every summer called VALUEx Vail. Vail is a quaint, beautiful, ritzy ski resort town tucked away in the gorgeous Rocky Mountains, about 100 miles from Denver.

One day I received an e-mail from a reader asking why I — a value investor — would have a conference in an expensive place like Vail. He suggested that as a true value investor I should hold the conference in a hotel somewhere by the airport where prices are much cheaper. His precise comment was, “I thought value investors were supposed to like cheap stuff.”

This e-mail challenged my value-investment-hood. It made me question my value investing “values.” Was that reader right? Was I straying from value investor traditions? Maybe I should rename the conference VALUEx Motel 6 and hold it at a $36-a-night, remote airport hotel?

I recognized that the notion was slightly silly, but it started me pondering: What are the values of value investing?

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Vitaliy Katsenelson

I am the CEO at IMA, which is anything but your average investment firm. (Why? Get our company brochure here, or simply visit our website).

In a brief moment of senility, Forbes magazine called me “the new Benjamin Graham.”

I’ve written two books on investing, which were published by John Wiley & Sons and have been translated into eight languages. (I’m working on a third - you can read a chapter from it, titled “The 6 Commandments of Value Investing” here).

And if you prefer listening, audio versions of my articles are published weekly at investor.fm.

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