How Value Investors View the Markets and Market Performance

Value investors really don't care. Do value investors have an attitude problem?

The point is that value investors aren't that concerned about markets, trading processes, and trading behaviour.

The market is simply a place to buy a portion of a business - and perhaps not sell it for a long, long time. Value investors care little about whether an order is executed on the bid or ask price, nor do they care what regional market, ECN, or execution system was used.

The transaction is an investment, a long-term investment. The market simply provides a place to acquire the investment.

So, value investors generally don't talk much about markets. And if you're really a value investor (or want to become one), you yourself don't care about markets... except when they undervalue businesses.

Despite the academic rumblings of the "efficient market theory" (which holds that with good information and a sufficient number of players, markets will find the right price for a business), markets are not perfect. They are always bargains.

Stocks may be undervalued because of:

• lack of knowledge or
• lack of visibility, or
• perhaps they're part of a group that's out of favour altogether.

These stocks are selling for less than may be indicated by the value of the business or the potential of the business.

So, in this sense, value investors love the markets. The markets, through their imperfections, provide value investors their opportunity.

As Warren Buffett says, if markets were perfect, he'd be "standing on the corner holding a tin cup."