“PDV” is an acronym for patience, discipline and value-orientation. These are the qualities that guide and shape our investment style and philosophy when investing on our clients’ behalf.
Value-orientation means evaluating securities and investment opportunities based on market price relative to business value. Our philosophy is generally to seek out those securities whose business value (based on long-term fundamentals such as prospects for earnings growth, financial strength etc.) is being underpriced by the market in the short run.
Another way to look at these opportunities is as a form of arbitrage between short-term stock price and long-term business value. Such arbitrage opportunities can surface for a number of reasons. For example, companies with temporary setbacks, such as a poor quarterly earnings report, may be oversold by investors who overreact or do not have the patience to ride out the temporary downdraft. Often these are the very securities that for the moment make people reluctant or uncomfortable to own, because there is no prospect for an immediate turnaround. The general reluctance for investors to own these types of investments at any price means they are likely to be priced inefficiently, creating an arbitrage opportunity for the patient long-term investor.
We endeavor to be disciplined in applying our value-driven investment decisions for clients. This means having the courage and conviction to pursue our investment style and maintaining confidence in our judgment, even if they are at odds with that predominating on Wall Street. The Wall Street crowd tends to move en masse. The crowd is not wrong all the time, but crowd psychology will often overly hype or punish a security, thereby offering opportunities. PDV often finds itself avoiding securities that are being heavily promoted or touted by a large number of brokerage firms; conversely, we are often attracted by securities that are out-of-favor with the Wall Street investment herd.
PDV believes successful investing requires not only value-orientation and discipline, but also a lot of patience. A lack of patience often leads people to sell at the bottom and buy at the top. Because PDV generally focuses on buying securities that are out-of-favor, it will usually take some time before these securities will come back into favor because of improving fundamentals or other reasons. It cannot be overemphasized that you must have patience in order for PDV’s strategy to have an opportunity to work for you.
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