Why is it Challenging for Activist Funds to Engage with Companies with a Low PBR?
Buying Low Market Cap relative to Book value Could be effective...
However, it is NOT!
WATCH!
What Warrenf Buffett said
Warren Buffett's Take on Benjamin Graham's Strategy in 2000:
- Warren Buffett credits Benjamin Graham with a significant influence on his investment success and holds "The Intelligent Investor" as the greatest book on investing.
- Graham's strategy of buying stocks trading at two-thirds or less than net current assets provided a margin of safety and satisfactory returns.
- While this strategy might still yield positive outcomes due to corporate activities, such as takeovers, it's challenging to find stocks trading below their net current assets in today's market.
- The investment landscape has shifted; previously, when businesses stopped working, their working capital could be taken and given to shareholders, but now, the culture has changed, and many others claim parts of the working capital.
- Graham's era featured many more companies selling below their working capital and at low P/E ratios, but today's market presents a different set of opportunities and challenges.