Value Investing: When History May Not Be Enough
Might this time be different?
The Long View
Finance professors are historians. Because their research must withstand tests of statistical significance, it typically is conducted over prolonged time periods. Consequently, they also tend to distrust growth stocks. The broad view informs them that today's champions become tomorrow's also-rans. Competitors arise, while winners grow complacent.
Management consultants have a different perspective, as they are paid to identify ongoing corporate advantages. When Tom Peters and Robert Waterman Jr. penned the 1982 best-seller, In Search of Excellence, it was to highlight "eight basic principles of management" that, in their view, enabled companies to succeed. Unfortunately, the businesses that they profiled were less remarkable after the book was published. For the most part, their financial health declined.