“Vishal, since the market is up so much over the past 3-4 years, and especially after the surge over the last few months, I’m looking for cheap stocks and sectors that have been left behind, even if they are average businesses,” a value investor friend Ravi told me this as we met for lunch last weekend.
“Why?” I asked.
“Because it’s almost impossible to find value among good quality companies…your so-called moat businesses. And I am a true blue ‘value’ investor you see.”
“Oh no,” I told Ravi. “That is a dangerous thing to do.”
I understood what Ravi was hoping to do. It also sounded logical i.e., to identify and buy stocks that remain cheap in a market where most businesses are quoting at high valuations.
But sensible investing doesn’t work that way.
“There is a big difference between ‘cheapness’ and ‘value’, Ravi.”
“Why do you say that, Vishal?”