Quote from Daal:
This is why value investing works, volatility in revenue lead to a massive increase in volatility in the stock and the vast majority of the time when this happens in my experience the market overshoots and the stock becomes a bargain. The more you get absolutely viciously attacked by investing in a stock by a lot of investors the more likely it is undervalued, that is not true everytime but its true on avg and thats what excess returns are all about
Who is getting "absolutely viciously attacked?"
Value investing works because the market occasionally gives you an opportunity to buy dollar bills for 50 cents, as determined by a thorough and well-reasoned analysis of the assets, the opportunity and the risks, with an ideal situation being one where you could break up the company and sell the parts for a greater value than the whole, or where the replacement cost of the assets is significantly greater than current market value.
Ron Johnson was successful selling brilliant, world-class products to the wealthy and upper middle class in a top of the line high concept setting. How that translates to turning around a beaten down middle-America has-been is damn hard to say.
The word is that Johnson used the word 'Apple' an uncomfortably frequent number of times in his JCP turnaround presentations. But of course, that was why he was hired, and why the stock surged on his appointment... because investors somehow expected the "Apple magic" to rub off on JCP. The guy had a grand vision, took a big home run cut, and apparently whiffed.
The rationale for AAPL's magic being transported to JCP never made much sense. And as far as value investing goes, it is a far cry from, say, the opportunity to buy a chemical company at such a depressed price that you are paying for plant and equipment only, with the value of the franchise, inventory and customer relationships thrown in free.
Real value opportunities, once the balance sheet case is laid out, don't require tortured rationales about who hates what or what some hotshot new management can do. And usually they don't turn up on the first or second 10% sell-off either, with a protracted "left for dead" period a part of the equation more often than not.
My opinion, since you are going to assume the worst of me anyway, is that you have this weird fetish for catching knives on a broad assumption that sharp selloffs are always 'mispricings', rather than a justified adjustment from a previous overvalued / overoptimistic state. A habit of seeing inefficiency everywhere you choose to see it can be worse than not seeing inefficiency at all.
But hey, maybe Johnson pulls it out -- assuming he doesn't get fired first -- and JCP goes up lots and lots.
Quote from Daal:
Its often said that one shouldn't appeal to authority in a debate as it could be a fallacy. Thats only true sometimes. If the avg person plays a hand of poker in a certain way that way could be right or could be wrong but if Allen Cunningham says it was wrong, its almost certain that the person is a huge underdog to be right if he think he played the hand correctly
Its the same thing if the avg ETer has an opinion on how to increase sales per sqt foot of a store in the long-run but Ron Johnson think its wrong
HA HA HA... wow, seriously? You just referenced a cognitive fallacy, then played to the cognitive fallacy -- in lieu of actual argument -- and finished up with oblique ad hominem. That was almost impressive.
