Contrarian thinkers air their investment views at RE:CM conference

There are many key attributes that make for a successful investor, but one of the most important is the ability to differentiate his investment decisions from the crowd. This is according to Piet Viljoen, Executive Chairman at RE:CM, a value based asset m

The conference brings together prominent international investment thinkers and this year featured Dambisa Moyo - international economist, Aaron Edelheit - CEO of American Home Real Estate Company and Dan Denning - author of New York Times Bestseller “The Bull Hunter”. They were joined by international investor Marc Faber, otherwise known as Dr Doom. Faber is well known for his contrarian approach to investing and his interesting views of the global stock and futures markets.

According to Viljoen, it is very difficult for an investor to generate exceptional returns when he is doing exactly what others are doing. He says that the great majority of investors that ‘go with the flow’, create herding and momentum, which results in stock prices being driven far above or far below fair value. Viljoen says that the investor who understands the need to be patient, who values and abides by common sense and understands the difference between price and value is the investor who will reap the rewards. “Investors are increasingly displaying a declining interest in analysis, often preferring to make use of simple, quick bites of information to make key investment decisions. Unfortunately, this behaviour leads to an increasing possibility of errors taking place.”

Viljoen warns against the dangers of looking to bestselling books as a source of information in investment decision making. “If your goal is to become a good investor, then best selling lists are not relevant data, they are not information. If I want to become a good investor, I want to know what works in practice, not what sells a lot of books. Unfortunately, investing well means deliberate and critical analysis to understand the true underlying relevance and meaning of the data and most importantly the price to value relationship.”

Viljoen says that good investors need to possess patience. “A good example of why investors need patience is compound interest. Compounding works in the patient investor’s favour.” He says that common sense is also necessary for good investing. “Always make use of common sense when making investment decisions and always walk away from questionable investment ideas.”

Viljoen says that the most critical factor for successful investing is the ability to distinguish between price and value. “Value is a stable number over time. The market continuously tries to guess how much stocks are worth and sometimes these decisions are made in a very emotional manner, thus resulting in a very volatile number, as seen on the stock exchange. Extensive research and analysis are therefore the best method of evaluating a stock’s value.”