“So how were you positioned for the EU referendum and how did you factor the currency implications of Brexit into each of the holdings in your portfolios?” an analyst asked in a recent meeting. Clearly our interrogator was not a follower of The Value Perspective or at least he had not read Throw out the playbook, our response to the referendum result – and indeed to any event that could lead to difficult and volatile markets.
Our meeting continued in a similar vein and, around the time we were asked about the specific catalyst that led to us buying into the mining sector, I found myself pondering the dangers of information overload. I continued to do so as I returned to my desk and so, fully aware of the irony, decided to type that phrase into Google.
Towards the top of the 232,000 results the search engine returned in 0.63 seconds was Brandwatch’s 96 Amazing Social Media Statistics and Facts for 2016 – a number of which genuinely lives up to that billing. Did you know, for example, there are 2.3 billion active social media users or that Facebook Messenger and Whatsapp handle 60 billion messages a day or that Wordpress alone publishes 56 million blog-posts a month?
We had better stop before we give you information overload on information overload, which would definitely be against the spirit of this article. Still, if such statistics are even remotely accurate, then the world has to be developing ever shorter attention spans and time horizons – the dangers of which were encapsulated in a neat analogy in a second Google result – The Next Obesity Epidemic.
More revealingly subtitled “How information bloat is endangering our mental fitness, and what we can do about it”, the article argues a similar trend to the one witnessed in food consumption over recent decades – “that the easiest foods to make, to buy and to eat are the worst foods for us”, thereby making our diets ever more unhealthy – has occurred in the production and consumption of information.
“The internet has created an environment where not only is it easier to publish and push out information than ever before, but an entire industry depends on more content being published and shared every minute of every day,” it continues. Pointing to the growth in content illustrated in the following chart, it adds: “As with food, the easier it has become to publish information, the more the quantity has increased and the quality has decreased.”
Source: IDC report 'Extracting value from Chaos' 6/11
Here on the Value Perspective, in articles such as Prediction addiction, we have written at length on the dangers of believing that more information is, in and of itself, a good thing – not least because it can increase the chances of investors committing the behavioural finance sin of overconfidence. So let us instead return to our recent meeting and our reply when we were finally afforded a chance to speak.
With so much information in the world – and by extension so little time to consume and make sense of it – we explained that we prefer to focus on the things we know we can do well. As we wrote in Time to think, that means spending a great deal of time trying to understand the market price of an investment that is implied from today; the past track record of similar companies in achieving those expectations; and the associated risks.
What helps us adhere to this value-oriented investment strategy – and to a much longer timeframe than most investors are prepared to live with – is the 100-plus years of data that underpins it. This tells us that despite all the ‘exciting’ new metrics seemingly being created every day – all the ‘eyeballs-to-screens’ and so on – what really matters is valuation and balancing cheaply valued asserts against their associated risks. The rest is just noise.