Book Review: "Where the Money Is" by Adam Seessel
"Where the Money Is" by Adam Seessel is a comprehensive exploration of the world of investing, focusing on finding lucrative opportunities in the stock market. Seessel delves into the fundamental principles of successful investing, emphasizing the importance of understanding businesses, industries, and economic trends. He discusses various investment strategies, from value investing to growth investing, and provides insights into how investors can navigate market fluctuations and capitalize on opportunities while managing risks effectively.
Seessel delves into the psychology of investing, highlighting common behavioral biases that can lead to poor investment decisions. He emphasizes the significance of discipline, patience, and a long-term perspective in achieving investment success.
Far be it from me, an amateur investor and known idiot, to criticize Seessel’s work and theories. He’s been involved in the financial industry longer than I’ve been alive.
However, it feels the book, which I thoroughly enjoyed overall, is based on a premise I don’t necessarily think holds true. Or, to describe it another way, while it may be proven true, the motivation/foundational aspects of the book are faulty.
Seessel mentions multiple times he is a traditional value investor at heart. He then goes on to mention value investing has underperformed the larger market over the past 20 years. As a result of said underperformance, his advisory business has struggled to keep up with benchmarks his clients set for him.
Seessel is not alone in his underperformance — many other value investing firms have complained about similar results over the period mentioned above.
Where Seessel loses me is when he starts explaining his theory of Value 3.0. He begins to manipulate the earnings of various tech stocks in an effort to make them look cheap compared to traditional metrics of valuation of non-tech companies. While this method of valuation has certainly proven effective as it led him to buy Amazon, Intuit, etc., to me it feels like putting results over process.
Value investing should be viewed as a form of risk management that focuses on identifying undervalued assets with strong fundamentals, aiming to minimize downside risk while maximizing potential returns over the long term. By investing in companies trading below their intrinsic value, value investors seek a margin of safety that helps protect against market volatility and economic downturns.
By altering traditional value metrics, the skeptical side of my brain starts to work in overdrive. Are value investing traditions faulty, or is the market in a period of excessive returns in which said metrics are built to underperform?
Essentially, are the metrics telling you to stay away or to keep your cash on the sidelines, but in an advisory role managing the money of others, are you forced to chase market returns?
I’m not arguing against the results. It would have been foolish to stay out of the market for the past 20 years, sticking to your value investing principles while all your clients pulled their money and loaded into index funds earning 10% a year.
However, I think it’s misguided to say “value” investing should or has changed. Instead, I think the truth is the market has produced returns that do not totally reflect economy and business reality, and at some point in the future, a correction could occur that will force folks to rush back to those old, antiquated valuation models.