Counting the Vote

Most investors have likely heard of Warren Buffett, aka the Oracle of Omaha, who is probably one of the world’s most famous stock market investors.  But if you ask him where he got all his smarts, he’ll most likely say from studying the writings of Benjamin Graham, aka the Father of Value Investing.  We can summarize Graham’s concept of value as follows:  In the short run, the market is a voting machine, tallying which firms are popular and unpopular.  But in the long run, it is like a weighing machine, assessing the substance of a company.

While Atlas will not argue with so august a figure as Mr. Graham, we are reluctant to adopt the implied buy and hold forever philosophy it encourages.  Rather, we see the market as a manifestation of human emotion and behavior.  Investors often seem to react reluctantly to good news and over-react to bad news.  The result can be temporary price fluctuations we interpret as noise, not signal.  Our approach to portfolio management looks for major changes in trends, not newspaper headlines.  We will stick to our knitting regardless of how pundits massage the ballot.

Despite the outcome of this most recent midterm election, we doubt that it will ultimately be seen as a market mover.  In the end, we deal with a market of stocks, not some monolithic stock market.  Behind the price action of each listed security you will find a plethora of variables: management, product, labor force, costs, and demand.  Relatively speaking, the day-to-day price fluctuations of an individual stock is just static.  Atlas will continue to follow the trends within each of our managed portfolio’s components, investing based on them, not on election results that may prove to be more a popularity contest than something more substantive.  (by J R and Christopher)