Patience and Value Investing

If value determination of a stock is the soul of Investing, then Patience is the heart, which will keep the "Investor" beating. Pateince can get you a multi bagger or convert that multi-bagger into a multi-loser. Warren Buffet has been quoted in the book "How to Pick Stocks Like Warren Buffett: Profiting from the Bargain Hunting Strategies of the World's Greatest Value Investor" by Timothy Vick, giving an example of the baseball player Ted Williams, having the seventh highest batting average of all time and the last man to average more than 0.4 in an entire season. Ted William says,

“To be a good hitter, you’ve got to get a good ball to hit.”

Along the same lines, to get a multi-bagger you should patiently wait for the right stock, at the correct value to make a buy and hope to make money out of it. Te patience part does not end at buying the right stock. The level at which you sell is also very important. Thus, if your stock is not doing well, you should still persist with it if you think you really have picked a value company, for in the coming time, the market will definitely recognize the worth of the company.

Investment versus Speculation

Today there is but a thin line that differentiates an Investor from a Speculator. According to Benjamin Graham - The Father of Value Investing -

An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting this requirement are speculative.

The most important point of this definition is "Investment promises safety of principal and an adequate return".

Now take for example a Short seller. Is he now an investor or is he a Speculator? A short seller is one who borrows shares of a company and sells them with a hope that the prices of the shares will fall and he would be able to buy back the shares at a lower price and return them. The difference in the price is the return he gets. If the price of the share increases, he loses. Now where do you see any investment happening? Where is the principal he is investing and what is he investing his money in? What is the difference between this short seller and a punter betting on a horse who he feels will win?