The Superinvestors of Graham-and-Doddsville (1984)

Buffet, on the other hand, regularly buys up these low-volatility companies using borrowed money. If you take something that behaves like 80% of the S&P 500 and lever it up 125%, you'll get the performance of the S&P 500. But the 80% S&P 500 stock is cheaper than it "should" be, so you wind up over-performing instead.

Behavioral mispricing can be arbitraged. Risk cannot be arbitraged away.

Value still works and will always work due to this added risk component.

I always keep a null hypothesis handy. (Usually an index fund.) I’ll research my targets alongside the fund(s).

I'd be interested in learning more about this, even if just for the sake of a hobbyist's fascination in stock markets outside of the U.S. Are there any resources you'd suggest for somebody who has amateur interest in value investing but without a lick of Japanese language & cultural knowledge?

> To be demonstratively good at value investing time and time again requires robotic levels of dispassionate patience

There's a good sci-fi short story buried in this somewhere... Stock Runner, perhaps?

Balance sheets become less meaningful going forward. Google's greatness is not to be found in its physical assets.

You correctly mentioned being able to turn to smaller companies and low liquidity situations. Some professional players also self sabotage due to a particular mandate or ridiculous constraints, such as avoiding volatility. Having too much apparently useful information can also be a curse.

You can also choose to just "not play" sometimes. You don't have customers or bosses and you're only competing with yourself. Or rather, you're not competing at all. When things get confusing and very highly valued (as they have been for years now), you can just do nothing. Or at least do less.

Another advantage you have, which is related, is being able to have a very long term perspective. By which I mean a perspective measured in decades, which is the timescale at which the world and its financial conditions truly seem to change.

There's times like the late 70s/early 80s, where stock markets were not just ultra low, but pretty much COMATOSE. People just didn't do stocks. They remembered stocks as that thing from another age. At least in my country, the typical stock owners in that time were families whose patrimonium was tied up in 1 single company that they controlled. Needless to say, volume and liquidity was next to nothing. (By my understanding, conditions like these must have occured at least 4 times in the 20th century. Not yet in the 21st century, not even in 2000-2002 and 2007-2008, but it will.)

In a sort of Upside Down World mirror image of today, investors in the late 70s/early 80s were all about fearing stagflation, when the exact opposite was about to unfold due to central bankers receiving popular carte blanche for brutal anti-inflation shock therapy. They were quite literally lining up around the block to buy gold. Movies like "Rollover" were being made and Grandmaster Flash was rapping about double digit inflation.

Today it's all about "TINA" and low yields and the central banker put, while in reality central bankers are slowly moving back to taking orders from politicians and are walking on egg shells about a 0.1% hike because they suspect they have painted themselves in a corner. Back then some companies where almost literally hiding their profits ("pour vivre heureux, vivons caches") whereas today making a loss is almost something to be proud of.

That being said, even though these are very hard times for value investors, you can always keep searching. Like you say, it's a hobby, like going to flea markets. Personally, for the last few years, I've found interesting stuff going on in (certain) gold mines. No moat and a dependence on the price of a commodity most hated by Buffett. The general atmosphere there is depressing and it's definitely not a crowded place. There were 3 subsequent heavy tax loss selling years (2014, 2015 and 2016).

Yet the sector has been going through a very extensive cleaning period after the 2011-2016 nuclear winter and you can find (fairly) reliably profitable mid tier producers at very nice prices. They will still go up and down with the gold price, so you can't call them real value stocks. But the good ones can stay profitable even with lower prices and therefore do not go down as much as the others. So there is an obvious differentiation and a sizeable margin of safety, as big as it will ever be there. In that sense, they look like value plays to me. I'm comfortable being there.

In a more negative way, I've become interested in South Africa, an increasingly unstable country where 70-80% of the world's platinum and rhodium are currently being mined at massive losses. (Holding platinum and rhodium ETFs is commodities speculation rather than value stocks, but ok.)

1. He recognized the multiplicative power of combining the insurance float alongside his stellar investment ability.

2. He recognized the power of moat and brand value vs. Graham and Doddsville.

3. He saw the value in return on capital over purely P/E for a growing business from Sees Candy.

As an aside, one reason long/shorts have had a tough time is that low rates make it harder to generate an automatic 6% return on your short book.

But, I believe many value investors have failed to understand how technology and network-based platforms work. P/S works better for AMZN than P/E when the CEO is trying to minimize E. NFLX could have lower its P/E to 20 if it charged $15/month last December. FB just had to monetize its platform by something like a couple dollars per user right after it IPO'd. I think many traditional value investors did not understand or adapt their thinking regarding stickiness, revenue per user expansion, fixed costs for platform-based businesses, and redefining what tangible and intangible asset value is.

There's an almost stubbornness to many of these investors versus a curiosity to listen to an alternative viewpoint.