- By acting greedy when others are fearful, intelligent investors can reap enhanced returns under the right set of circumstances.
- Times of fearfulness are when all the bargains can be found and where the seeds are planted.
- The value of a stock is relative to the amount of earnings it will generate over the life of its business.
It seems that there have been a few Seeking Alpha writers capitalizing on Warren Buffett’s famous saying,
Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
As a value investor, it is imperative to know when it is time to leave and to be prepared for that perfect opportunity, to be greedy when others are fearful, yet to be greedy for an investment with long-term durable economics and rational, honest management.
Last week, Dividend Sensei wrote this article: Greedy When Others Are Fearful: Why One Of These 3 High Yield Dividend Stocks Could Make You A Fortune. He examined three Mall REITs – CBL & Associates Properties (CBL), Washington Prime (WPG), and PREIT (PEI) – all suffering from the retail meltdown. In my newsletter (publishing on Weds), I will be featuring a Mall REIT sector report and I agree with Dividend Sensei’s closing remarks:
Bottom Line: Only High-Risk Investors Should Own Any Of These REITs, But CBL Represents The Best Total Return Potential Of The Three”
Also, Colorado Wealth decided to jump in the “fear factor” as he wrote an article yesterday: Be Greedy When Others Are Fearful, Buy This 6% Dividend Champion With Me. The topic of that article was Tanger Factory Outlet (SKT), and the author summed up the article as follows,
I'm going to stake my money against the market’s fear by owning several mall REITs. I started buying in earlier this summer and will be adding more as I find great values. Often it is great values on great companies.”
I have been working on a detailed report on Tanger and it will be one of the most granular research reports that I have produced. I have two interns assisting me with the research and I plan to share the report in a few days with my premium subscribers. I will also include it as a supplement for subscribers of the Forbes Real Estate Investor.
Warren Buffett's almost legendary phrase suggests that when others are greedy, prices typically boil over, and one should be cautious so that they don't overpay for an asset which subsequently leads to lackluster returns. When others are fearful, it may present a good value buying opportunity.
By acting greedy when others are fearful, intelligent investors can reap enhanced returns under the right set of circumstances.
Buffett's pal, Charlie Munger, once used the analogy of a New Year's Eve party to explain the greedy investor concept. He alluded to a frothy stock market as the New Year's Eve party that had gone on long enough.
The bubbly is flowing, everyone is enjoying themselves, and the clocks have no arms on them. No one has a clue that it is time to leave, nor do they want to. Just order me another round, forget what time it really is.
Munger was trying to point out that as a value investor, it's imperative to know when it's time to leave and to be prepared for that perfect opportunity, to be greedy when others are fearful, yet to be greedy for an investment with long-term durable economics and rational, honest management.”
Times of fearfulness are when all the bargains can be found and where the seeds are planted. Today, I'm going to provide you with my research on a REIT that I am upgrading to a Buy. I am not currently a holder, although I am looking for an opportunity to be greedy!