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Mr Market creates opportunities in European value

Sep 21, 2022

Benjamin Graham, the father of value investing, introduced the allegory of Mr Market, a hypothetical investor who is driven by panic, euphoria, and apathy, and approaches his investing as a reaction to his mood, rather than through analysis. Such a situation creates opportunities for the long term patient investor who can than invest at substantial discounts to the fair value of the underlying businesses and create substantial returns when the stock price starts to reflect the intrinsic value of the company. Example: European value stocks. According to research by Goldman Sachs, typical value sectors like basic resources, banks, autos & parts and energy are in the 10th lowest valued decile since 1987. Historically each time this happened it created outperformance. That is why we believe it is good to be a value investor in the current environment, especially when you focus on quality businesses like we do.

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