The Perversion of the Investment Catalyst


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Look me in the eyes. Does your stock have a catalyst?

For every stock you buy, does it have a catalyst?

Yes? No?

Most stock articles you read always include some sort of upcoming catalyst that is going to propel the stock higher. Heck, even ValueInvestorsClub requires every stock pitch to have a catalyst. But to only invest in stocks with clear catalysts defeats the purpose of value investing.

Catalysts are not important, nor is it required for an investment.

Take it from the man who defined value investing, Ben Graham. He just wanted one thing and spent his days with Walter Schloss searching for it.

Cheap stocks.

Warren Buffett also wants to buy one thing.

Awesome companies.

Neither mentioned anything in any of their writings about seeking a catalyst to make a successful investment. In fact, they told you the opposite.

Sit and wait they said.

The problem is that sitting and waiting is torture today. There has to be action. There has to be fast moves up and if something doesn’t play out within a few months, it’s a dud and not worth keeping any longer. “Next!”

Investors today lack assiduity. That’s Charlie Munger’s technical term for sitting on your ass and doing nothing.

If you must seek a catalyst, remember that being cheap itself is a catalyst. That’s the number one catalyst which always gets ignored because it’s so simple and boring.

I hope a light bulb just went off somewhere.

Let Mr Market do his thing and waltz around with Miss Price in his arms. You don’t have to join his dance or gaze longingly at Miss Stock Price. They are a pure vanity couple. Great looking and fun to be with but horrible to live with.

Having a catalyst is good, but is it necessary?

No.

You make money by waiting.
Monish Pabrai

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