I must create a system, or be enslaved by another man’s–William Blake
This reader confronts a quandary that many of you might have faced. Thoughts or suggestions? Advice? I will post my thoughts later.
A Reader Writes about transitioning to value investing
I have traded equities, futures, and options successfully from a carve-out from a fund. I have spent my entire 11 year career in two buyside proprietary shops. Fortunately or unfortunately, I never had any finance exposure in school or career wise (in the traditional sell-side sense). I graduated magna cum laude from XXX with major in psychology. I have always wanted to become a value investor and run my own fund one day. I currently run my own book now but it is 180 degrees from what value investing is as I’m sure you know being a former trader.
The struggle for me is that I don’t have the fundamental basics down yet for value. I am currently teaching myself basic accounting (I actually had to go back and do a refresher in algebra as well). I’m not an analyst although I use and trade off analysts for work and find the transition difficult in analyzing financial statements, companies, etc. because of my lack of experience. I came into trading without a mentor and had to self teach myself, and find myself in the same position again for value investing.
I have read a lot of the value investing grails like Graham and Dodd, Buffett, Greenblatt, Greenwald, Montier, Klarman, etc., However, putting things together without the basics has been overwhelming and tough for me. I understand the very simple concept of buying with a margin of safety but actually putting that into practice is not an easy task without some guidance.
I am having a tough time learning valuation. When I took Greenwald’s executive course on Value Investing last summer, I understood the big concepts but when we got down to the numbers, such as figuring out WACC, going through items line by line, a lot of things were over my head. I know these are things I gain from experience and learning the basics but it’s been tough trying to figure out what to learn on my own. Another problem is I don’t have a network of people to tap into that are value people. Everyone in my world is fast money whether they are fundamental or not.
I had the fortunate opportunity to sit down and speak to one of the value managers at A Value Investing Firm recently who is also a professor in the Columbia Value Investing Program. I had seriously considered going back to school, but she and I agreed that since I just turned 36 and that there is no guarantee that I will be selected into the Value investing program, that self-instruction may still be the best course for me. I have had a successful run as a trader but I would love to make the transition to Value just as you have. I would love any suggestions you have for me or perhaps we could even get together for a drink. I would be very curious and interested how you made the transition.