Harsh experience in recent years may have taught investors to factor so-called ‘black swan’ events into their thinking but what about Siberian swans? Where do they fit in the, er, pecking order? More importantly, do they have anything to teach us about aspects of value investing, such as long-term thinking and the virtues of contrarianism? How could you ever doubt it?
While unlikely to bring the global economy to its knees, Siberian swans do seem to have played some part in boosting used 4x4 car prices over the autumn. According to The Telegraph, it was – among other things – the appearance in the UK of 300 of the birds 25 days ahead of their earliest recorded arrival that prompted weather forecasters to speculate Britain faces its longest winter for 50 years.
This, in combination with earlier pronouncements from the Met Office about the possibility of another ‘Big Freeze’ winter, such as the country saw in 2009/10, apparently led to an early rush to buy 4x4s – predominantly, if our own driving experience is anything to go by, in the frozen wastelands that are some of the more well-heeled postcodes of north and west London.
Whatever – according to The Telegraph, this earlier than usual seasonal rush for used 4x4s saw prices surge by an average of 17% between August and October and the piece went on to quote an expert as saying: “Snowy, icy weather is often a sharp reminder to motorists of the benefits of four-wheel drive, and typically sparks buyers’ interest.”
Well, OK – but while some winters can be snowy and others can be mild, one thing we can say for sure about the season is that it comes once a year. That being so, would it not make sense for anyone who might be in the market for a used 4x4 to think about buying it when they hear the first cuckoo of spring rather than after the 300th Siberian swan has landed?
Corporate and stockmarket cycles may not be quite as regular as the seasons. Nevertheless, for investors who are prepared – as we are on The Value Perspective – to take a longer-term view and think in a contrarian way, they will still present opportunities to benefit from the wider market’s tendency towards short-sightedness, acting emotionally and following the crowd.
The root-cause of the short-term price volatility seen in the used 4x4 market this autumn is the same one that leads to share-price volatility in the wake of, say, the publication of companies’ quarterly numbers. It is only human nature to think about buying a 4x4 as the weather turns cold just as it is only human nature to think about investing in businesses when their future is already looking positive.
In both instances, however, you are likely to be paying a lot more than if you had thought longer-term and been prepared to swim against the tide – picking up your 4x4 in spring and your stocks when they are lowly valued because no-one else is in the mood to buy them. We prefer the investment equivalent of buying a convertible in winter – or, even if it does not feel quite right, Christmas cards in January.