Dan Rasmussen on Investing in Europe, Japan, US Small Value and The Humble Investor | V:AH S07 E01
Jan 13, 2025
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Dan Rasmussen, author of 'The Humble Investor,' dives into the art of identifying undervalued investments amid fluctuating market sentiments. He discusses intriguing investment prospects in Europe and Japan, emphasizing the impact of corporate governance reforms. The conversation shifts to the current dynamics of small cap value stocks and the social psychology influencing investor behavior. Rasmussen also explores the contrasting roles of gold and Bitcoin in today's market, providing insights on their resilience and correlations with growth stocks.
Successful investing hinges on recognizing the unpredictability of the future and aligning decisions with a humble perspective on market sentiment.
European markets present undervalued opportunities despite widespread pessimism, with strong fundamentals from companies trading at significant discounts.
Understanding the psychological dynamics of investing can foster independent thinking, encouraging investors to maintain sound judgment amid market pressures.
Deep dives
The Concept of Humility in Investing
The podcast emphasizes that successful investing is not solely based on analysis but rather on understanding the limitations of one's predictive abilities. The host discusses the author's approach, arguing that the future is inherently unpredictable and that decisions should be made with this in mind. He suggests that a humble investment strategy focuses on finding value where others have misplaced confidence, whether through excessive optimism or pessimism. This perspective highlights the importance of meta-analysis, where understanding market sentiment can lead to better investment choices.
Opportunities in International Markets
The discussion points to Europe as a region that has been undervalued due to widespread pessimism stemming from events like Brexit and the war in Ukraine. However, the author notes that the fundamentals of European companies are strong, with many generating high returns on assets and trading at significant discounts compared to U.S. counterparts. Examples are provided to illustrate that despite lower corporate earnings growth, high-quality businesses in Europe are available at reasonable valuations. This assessment suggests that investors may find profitable opportunities by looking beyond U.S. markets.
The Case for Japanese Stocks
A crucial topic revolves around Japan’s market, which has been undervalued for decades following a dramatic economic rise and fall. The author emphasizes that Japanese companies often trade below their book value, indicating significant potential for value appreciation. Discussion includes the potential for corporate governance reforms to catalyze stock price growth, as companies start implementing strategies like share buybacks and dividend increases. The podcast asserts that even without significant economic growth, simply optimizing balance sheets could drastically enhance valuations in Japan.
Volatility and Its Impact on Returns
The podcast introduces the significant role of volatility in portfolio management, asserting that high volatility can drastically reduce effective returns due to a phenomenon dubbed volatility drag. This concept suggests that minimizing volatility can enhance long-term investment performance despite similar levels of returns. The strategy elaborates on how utilizing risk models to predict volatility can guide investment decisions, aligning capital allocation more effectively based on predicted market conditions. By understanding the correlation between asset classes and volatility, investors can optimize their portfolios for better risk-adjusted returns.
Behavioral Influences on Investing
A compelling section addresses the psychological dynamics of investing, particularly the tendency for individuals to conform to market sentiment, which can lead to irrational investment behaviors. The discussion references the Ash conformity experiments to illustrate how social pressure can cause even rational investors to stray from sound judgment. This psychological insight is leveraged to encourage independent thinking in investment decisions, advocating for a thoughtful approach even amid prevailing market euphoria. The point emphasizes that standing apart from the herd can lead to more informed and potentially profitable investment choices.
Value: After Hours is a podcast about value investing, Fintwit, and all things finance and investment by investors Tobias Carlisle, and Jake Taylor. See our latest episodes at https://acquirersmultiple.com/podcast
We are live every Tuesday at 1.30pm E / 10.30am P.
About Jake
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ABOUT THE PODCAST
Hi, I'm Tobias Carlisle. I launched The Acquirers Podcast to discuss the process of finding undervalued stocks, deep value investing, hedge funds, activism, buyouts, and special situations.
We uncover the tactics and strategies for finding good investments, managing risk, dealing with bad luck, and maximizing success.
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ABOUT TOBIAS CARLISLE
Tobias Carlisle is the founder of The Acquirer’s Multiple®, and Acquirers Funds®.
He is best known as the author of the #1 new release in Amazon’s Business and Finance The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market, the Amazon best-sellers Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014) (https://amzn.to/2VwvAGF), Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012) (https://amzn.to/2SDDxrN), and Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016) (https://amzn.to/2SEEjVn). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.
Prior to founding the forerunner to Acquirers Funds in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam.
He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999).
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