Since the 1970s, the bulk of financial markets have been dominating the hypothesis of efficient markets (fame) and modern portfolio theory (Markowitz / Sharpe), an academic approach supported on the assumption that the price reflects The value of a financial asset almost perfectly, and almost instantaneous, in a vision and analysis of models (and composition of portfolios) anchored in the analysis of volatility and historical correlations as an approximation to the risk of investment. Although once and another, these hypotheses have been false and in the best of cases, adjusted to very specific assumptions, continue to overwhelming the academic scope and, in many ways, the configuration and management of investment portfolios . The Veteran Investor, already deceased, Marthy Whitman in his magnificent book investment in value, book and classic at Wall Street (the first edition was in 1999), now edited for the first time in Spanish, calls this vision simplona and flat From markets, offering savers and investors A complete guide on how to guide our investments by supporting us in the correct assessment of assets from their fundamentals.
It is a very rich, dynamic vision (the investment is seen as a film, not as something static), and polyéderic of the markets, which part of the central axiom that the value is a subjective issue, tremendously complex, and that depends Of a crowd of factors and can vary quickly if the circumstances change. This value rests above all, but not only, in the potential performance that can give a specific financial degree, either an equities or fixed, and that it will also depend on the solidity and quality of this performance, of liquidity (theme to the Whitman dedicates a lot of attention, and practically unattended by the modern theory of portfolios), of the perception that investors have in particular title at the time of sale, the macroeconomic environment, or the volume of participation and the implications of control Politician who can suppose its sale, especially in equities titles. This assessment will also depend on the temporary horizon and risk profile of the investor who bought us our actions. In fact, another of the subjects to which Whitman’s text shed a lot of light is that the collective, for example, shareholders of a company are not a homogeneous group with the same interests.
In real life there are no two investors with the same intrinsic value, nor their interests can be the same: a trader, which speculates with a rise, or downhill, in the short term; an activist (with the capacity of influence on the management of the company), concerned about combining short-term value even at the expense of compromising long business; institutional investors, concerned about the quarterly growth of the BPA; or genuinely long-term investors, interested in the business capacity to continue creating long-term wealth, and therefore interested in the trend and not so much for the result of a specific quarter, they will necessarily have the same behavior, despite That the standard vision of the markets indicates that all shareholders have the same objectives and temporary preference. The book gives an interesting and very rich vision of conflicts of interest, omnipresent in any financial operation, as well as a more realistic vision of the role of information – which also has a lot of subjective- in the markets.
This granular analysis of the markets, also includes the rich market of capital markets (operations related to corporate finance), where the value can be affected by fusion or acquisition operations (M & A), or other operations such as bag outputs (
or Exclusion Operations, or leveraged purchases, either by an external LBO (LaVerage Buyout) or by the MBO management team itself.
Whitman, for example, makes some observations of great value about how the capital structure can add value to a company.
Whitman’s text is part of a basic premise that is that social sciences do not marry well with the enactment of general laws, as does the modern theory of portfolios or hypothesis of efficient markets, and where importance falls more on analyzing case by case
.
An approach that puts attention on the “micro”, in this case the analysis of concrete financial titles, participated and operated by people of meat and blood, with beliefs and approximations to value, liquidity needs, risk profiles and temporary preferences very
Different
Another relevant idea of the Book of Whitman is that of all the many labels that are used with respect to investment strategies and styles, most of the time used incorrectly, mainly two have really felt: specular or invest: in the first case
, it is played to “be smarter than others”, this is to anticipate oscillations in the short / medium term;
In the second case, we support the decisions (now yes) of investment in the fundamentals of the asset in which it is invested, trying to yield an intrinsic value, always imperfect, and whose margin of safety (difference between value and price) will depend on the quality
Of these fundamentals, the liquidity of the title, and many other factors impossible to quantify: remember that the risk, such as beauty, is not something that can be quantified.
Finally, one of the great virtues of the book is that it addresses the trade of investing without necessarily distinguishing between quoted or unionized markets;
Or, rather, a distinction between financial markets and corporate finance that is diffuse, where both planes are interposed and enrich in a mutual way.
This overview allows us to observe how the approach to the valuation of corporate finance, which many learned from manuals such as the sensational Bradley-Myers, has a much higher level of solvency than all the academic literature born of quoted markets: rich in data and papers
, very poor in value theories (never better said) and practical utility.
In short, a level and sophistication book for sector professionals who want to learn from a master veteran, or for demanding savers who want to enrich their vision of financial markets.
Investment in value
Autor: Martin J. Whitman.
Editorial: Deusto-Value School. 2021.
Price: 19.95 euros;
(9,99 eBook).
