Momentum vs Value Investing Which Strategy Wins in the Long Run SM

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If we were, for instance, momentum 
investors, okay? And I will tell you that,  

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for those of you who know what that 
means, momentum has been studied  

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across the globe over the last 30 or 40 
years. In the US, it’s worked pretty much  

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everywhere — not all the time, but on average, 
it’s worked very well over 30, 40 years.

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And not just in this country. 
But here’s the problem:  

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what if it didn’t work over the next 2 or 3 years?  

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It could be that we just have to be patient. You 
know, it works over time, and it’s cyclical. And  

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so it’s out of favor, and we just have to stick 
to our guns because it’s something that’s worked.

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Or it could be, if it didn’t work in the 
next 2 or 3 years, that the explanation is:  

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hey, it’s not so hard to figure out. A 
stock used to be down here and now it’s  

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up here. It’s got good momentum, and 
with all the data and the ability to  

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crunch numbers and computers and studies 
that have come out, it’s a crowded trade.

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It’s degraded — it’s not as good as it used 
to be. And if that’s what happened over the  

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next 2 or 3 years, I wouldn’t know the answer to 
that question. I didn’t know which one it was:  

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should I just be patient, or has the 
trade degraded? But if you view stocks  

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as ownership shares of businesses that 
you value and try to buy at a discount,  

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and that doesn’t work for a couple of years, 
I’m not going to change what I’m doing.

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I’m not going to buy the bottom 
right-hand corner — you know,  

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buy all the money losers in the companies 
that don’t earn anything or are trading at  

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100 times free cash flow. I’m not going to buy 
those, even if it works in one particular year,  

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and then sell the ones that are cheap relative to 
everything, get me high rents and everything else.

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I’m not going to change my strategy. And I believe 
that stocks will eventually — not right now, but  

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eventually — people get it right. And I may have 
to be patient. That’s really what I have to do.