Macroeconomics for Value Investors
Is Macroeconomics important for value investors? I like making videos about macroeconomics, about macroinvesting but most of the time when I'm analyzing companies, macroeconomics has very little to do with my analyses.
The greatest value investor in History, Warren Buffett $BRK.B has a bottom up approach to investing, looking at particular companies that fits his portfolio while the greatest macroinvestor, Ray Dalio has a top-down approach, investing in sectors/countries/assets that are going to have tailwinds on them in the coming years. These are 2 different approaches.
I have a top-down approach to investing, looking at sectors or countries that are going to win in the coming years, then looking for companies selling at a discount there. For example, I looked at Chinese stocks and invested in China Mobile, I saw the coming supply gap in Copper $COPPER and invested in Freeport-McMoran $FCX and I saw the coming new console cycle and invested in GameStop $GME .
There are, however, stocks in my portfolio which did not go through this process. For example, Genworth Financial $GNW , this is a pure value play. It had a low correlation with the market $SPX500 and was massively undervalued. It is also a special situation stock.
It is impossible to predict the economy but we can always see trends that are likely to happen. The best thing to do is to invest in companies that are going to win from these trends and making sure that they are undervalued. Fundamentals are always important. Always take a margin of safety. Even if you're wrong, you won't lose much money in the long-term.
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