Growing Rich - Arabictrader.com

GROWING RICH WITH GROWTH STOCKS
ONCE A BARGAIN HUNTER, ALWAYS A BARGAIN
HUNTER
Yacktman traces his affection for low-priced stocks back to his
childhood, when his mom pinched every penny she could. This discipline
was also driven home to him by a finance professor in college.
“A colleague recently told me, ‘The problem with value investing is
that it permeates your life,’” he shares. “I think it does. A consultant
came into my office once and commented that he liked to visit his
potential money managers in person because their surroundings set
a tone as to what kind of person they are. When you look around my
office, you’ll notice it isn’t an opulent place. We have nice furniture,
but it’s nothing fancy. I got most of my equipment used for a song
and had it refinished and recolored to look more modern. That’s just
how I’ve always purchased things for myself. If I’m looking to buy a
particular item, I’ll go to three or four places to see who has the best
price. My kids are the same way. When my son Stephen went shopping
for a new dining room set recently, he negotiated hard to get a
cheaper price. This search for value truly permeates our lives.”
Yacktman claims that 90 percent of the time when a stock he
already owns declines further in price, he’s buying more instead of
unloading it with the crowd. “If I’ve done my homework right, I know
what the private market value is, and that’s not going to change much
in the short term,” he maintains. “Therefore, as the stock goes down,
it creates more of a gap between the public and private-market value.
One of the toughest things for investors to do is buy stocks that have
gone down. They are consumed by too much superficiality. There’s
no substitute for knowledge. Once your knowledge level is high
enough, you can look at a stock that has gone down and say with
relative certainty it is an even more attractive buy than it was at a
higher price.”
This attitude may seem like common sense, and it is. After all, if
you’re attracted to a shirt at the store selling for $30, wouldn’t you
like it even more if it went on sale for $25? It makes you wonder why
so many investors are foolish enough to get rid of good stocks just
because of the headlines of the moment. Yacktman has a reasonable
explanation for this. “Probably 70 percent of all investors in this
country play the momentum game,” he estimates. “A lot of them are
driven by trivial things. As a result, they’re buying what has been
57