Stocks are down and that’s good news. What do I buy if I am a long term Value Investor ? And when?
Since we agree upon the fact that is impossible to time the market, the most important of the two questions is the first. If you have the capability of finding a real super wonderful business, or just a wonderful one, you are more than half a way to success. If the price makes sense you are easily buying something that will allow you to be happy in the next 5 or 10 or more years. Why? Because you learnt from before how to reach the figure in your own mind of the “intrinsic value” of that particular company. It’s a company you already know and you are following and you like so much to own. You’ re discounting at the appropriate interest rate the flows of positive cash flows that this particular business you know it generates (eventually from here to judgment day). You say to yourself : “I will buy this SuperFunMegaBusiness at this price because…” And make sure you have a pretty much articulate reasoning behind this answer. An answer you will base upon facts and facts that are valuable.
If the price of the stock goes down below your “intrinsic value” you don’t care about the market as a whole and the fluctuations of the entire SP 500 or you read the newspapers headlines or whatever. You don’t care if immediately the price keeps going down. You have a chance to buy more. You don’t let Mr. Market to instruct you. You let Mr. Market to serve you. You use him until he will be sober again and will use your same judgment in the future about that particular business you are able to understand before he does.
So, if you know what stock (business) to buy, you don’t care about the entire DOW and predict what will be tomorrow or in ten days or ten months either. You follow and look at the business you want to buy and the price is selling today compared to your intrinsic value. To your own ability to evaluate.
And that figure and reasoning is yours and only yours. That’s why you don’t let Mr. Market tell you what to do. Never. That’s why is never gambling. The opposite : it’s a fantastic game to play.