I like being an asset-based value investor because it fits my personality and lifestyle.
I have a lot of friends in all aspects of the markets, from long-term investing to high-frequency trading, and when we all gather at various events, I feel bad for the folks tied to their devices. The constant need to check news and watch every ticker is not my idea of a rewarding life.
Some people like it, but I don’t want to be tied to the screen. I prefer to be more like Walter Schloss, the legendary investor who beat the market handily for 50 years without using a computer or worrying much about the short-term price movements of his stocks. For that reason, I like boring stocks.
I have no interest in owning the popular volatile stocks that can change your net worth on a daily basis. I would rather have a collection of companies like Kansas City Life Insurance (KCLI).
Kansas City Life Insurance sells life insurance annuities and has a subsidiary engaged in financial services. The stock is very cheap, trading at just 60% of tangible book value, and it’s a pretty basic boring business. Nothing is likely to happen in one day, week or even month to change my opinion of the stock very much.
KCLI has a very conservative investment portfolio, and it is unlikely for a derivative to blow up the portfolio or suffer a sudden rash of mortality to materially impact the company’s prospects. I’m collecting a dividend of 2.5%, and management is buying back shares at a discount to book value. Earnings are improving, and at some point in the next few years I expect to sell the shares at a premium to book value and make a huge profit.
That isn’t to say I do not appreciate what the computer makes possible for deep value types. I can use a computer to quickly search the universe of stocks for issues that fit my criteria and download all the documents instantly to read at my leisure. That’s a lot easier than searching through the S&P Stock Guide and writing off for the 10Qs and 10Ks, which was the norm before PCs.
I want to use the computer to make things easier for me to make money … not be tied to it by an invisible chain of flashing quotes.
As a value investor, I want to own stocks that are purchased at very cheap prices and improve over time. It’s highly unlikely than any one-day event or price change is going to have a significant impact on my portfolio, so I can step out of the office when I want to get away for a bit. When I travel to the beach later this week, I won’t have to worry about every swing of the market. I just need to see prices and news at the end of the day.
It might not be as exciting as watching the tickers rush by, but I have found it to be just as profitable, if not more, and it allows far more time to enjoy the rest of life.
As of this writing, Tim Melvin was long KCLI.
