The same could be said for Facebook. What you're referring to is an irrational market responding to news and creating a sale on an asset. "Facebook on discount, buy now!" If you bought at the nadir of the $FB dip you'd already be up 7% right now.

Yes, those things do exist, that doesn't mean those companies are value stocks. Facebook is still trading at a P/E ratio of 28, and an EV/EBIT of 20, both of which are high. Was it a discount to it's current momentum? Yes. Was it a discount based on value? I'd say not.

Curious, how often is it even possible to evaluate a company using Graham and Dodd's methods these days? I haven't read much of their work, just The Intelligent Investor, so there's a lot I don't know. The difference in P/E ratio standards they talked about struck me, yes, but even more than that, I am unsure of how to translate a lot of their ideas about how you limit your potential losses into the modern economy.

Back when companies tended to have a lot of physical assets (relative to their overall value) that tended to depreciate slowly, that might have been easy to calculate. For a company that participates in the information or service economy, though, virtually all of their value is tied up in intangibles, and about the only physical assets that are likely to have any value at all after a few years are the office furniture.

As someone who followed Intelligent Investor (and Klarman's Margin of Safety concepts) as an amateur who made good annualized returns, my partner and I stayed away from the modern tech stocks. We basically agreed with what you say about the risk on the performance of a company like FB: if things go bad, there's no real moat or tech or assets that comes close to the market cap of the company.

What's still reasonably valid is the concept of both moats and float, both of which I think you can get indications of in the 10-Q/A reports that aren't always reflected in current expectations.

Also, focus on where you can win. You aren't pricing AAPL better than the legions of professionals over 5 years, but the boring small-mid cap stocks that are too small for major funds to care about have more opportunity.

And finally: this is why indexing is such a huge thing. This stuff is hard, and using a low fee fund to track the market lets you live your life instead of having an extra job. I personally quit because while the % was good, the scalar wasn't worth the time invested.

That's more-or-less what I concluded after reading II, too, and why I never made a serious go of it. With the amount of money I had to play with, even if I managed to double market returns, which I assumed was a very optimistic outcome, it would still be a lower return on my time, in terms of $ per hour, than just working the occasional contract job after hours.

"It's one thing to know it's going to rain. It's another to build an ark."

I'm still working on getting the balls to short some housing stocks for the burgeoning correction. It might be too late though. LEN KBH DHI TOL

Or two years too early. That's always the question.

In favor of it already being too late: TOL is back to where it was six years ago, with three times the sales now vs then, and for practical purposes infinite more profit (they only finally got back to profitable in 2Q12). What would the short thesis be against that setup? It certainly does look like a lot of downside is built in now. Meanwhile HD is trampling estimates.

We've got no inventory build (the exact opposite, a painful dearth of inventory). The job market is extremely strong. Mortgage defaults aren't soaring. Household debt isn't soaring. A value stagnation (wages aren't rising fast enough) looks like the most likely bad scenario for now, instead of a meaningful correction.