The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett

Chapter 8. Practicing the Art of Patience: THE FIFTH ELEMENT

All men's miseries derive from not being able to sit in a quiet room alone.

—Blaise Pascal

The financial media does a great job of sensationalizing the day trader who made 100 times his salary in one year or the hedge fund manager who timed the mortgage crisis just right and earned $3 billion in one year. For every one of these outliers, though, there are thousands of others who have failed terribly. Many investors tend to forget that slow and steady will always win the race. Investors who embark on a strategy of trying to reap riches quickly often face a similar outcome: continued loss of permanent capital.

Value investing, by its very nature, is about the gradual appreciation of capital. At times, value investors certainly will be rewarded with quick profits, but such bounty should be viewed as an added bonus to a disciplined approach. Value investing is a comprehensive investment philosophy that emphasizes the need to perform intense fundamental analysis, pursue long-term investment results, minimize risk, and, above all, resist herd mentality. The true value investor understands that patience is an asset, not a hindrance. A slight revision to Pascal's quote might apply to our investment managers today: "All investment managers' miseries derive from not being able to sit quietly in a room alone."

Too many investors approach the stock market as a speculative endeavor, often because share prices go up regardless of underlying ...