"Genius is nothing but a great aptitude for patience." - George-Louis de Buffon



Value investing can be described as the process of discovering and purchasing mispriced securities, then holding the securities until they approach their intrinsic value. The process is deceptively simple in theory but innately difficult in practice. One of the human traits that sabotages the process is impatience—the subject of today's discussion.



I like to think that I acquired my aptitude for patience at an early age when my quest in life was to attend the horse races on a daily basis. This pursuit was greatly burdened by my extremely shallow pockets. My greatest fear was going bust and being forced to sit at home, lamenting my lack of self control until I was able to attain a meager grubstake and re-enter the game. Fortunately, my motivation not to go belly-up was greater than my urge to bet the entire card. That order of priorities forced me to focus on a limited amount of races where I felt I had an edge over the rest of the crowd. Indeed, handicapping horse races is not much different than value investing except for the fact that confirmations of mispricings or in many cases mishandicapping, take a matter of minutes rather than months or years. In both cases patience is of the utmost importance unless one wishes to spend their retirement in soup lines or seated on the corner adorned in sunglasses holding out a tin cup.



The aptitude for patience I learned at an early age was put to test during the Internet boom of the late nineties when every mush-for-brains except for me was making money hand over fist. It was the era of "the new paradigm" a time when Cramer proclaimed JDSU stood for "Just Don't Sell Uniphase," the death of value investing. I must admit I was not completely immune to the madness. Under oath, I would have to admit to purchasing Intel, Motorola, Worldcom, and one other unnamed Internet company whose intrinsic value could have been exchanged for a Weimar Republic Mark.



Don't misinterpret my message, for the most part I stuck to value stocks. In fact, during that time I made one of my best purchases, an undervalued casino company named Aztar (former symbol AZR). The company owned the Tropicana on the southern part of the Las Vegas strip, in addition to other assets. The Trop was located on the hottest corner of Vegas at that time, directly south of the recently built MGM Grand. As I recall, the common stock at that time was trading between about four and ten dollars a share depending on the latest takeover rumors. Mario Gabelli through Gamco, held a large position in the company. I bought shares from the mid fours to seven dollar range and I was so excited about the company based on its huge discount to its real estate value, I not only visited the Trop but I also visited one of their Riverboats in Missouri. The story culminated with Aztar holdings being purchased by Columbia Sussex Corporation for over $50 dollars a share, following an intense bidding war in the spring of 2006. http://www.nytimes.com/2006/05/20/business/20casino.html?_r=2 Think my patience was rewarded? Think again. I sold out after holding AZR for several years for about 7 bucks a share. What should have been my moment of glory turned out to be my greatest blunder, strictly due to lack of patience.



One of Jessie Livermore's best quotes expresses the necessity of patience in regard to investing most eloquently:



"Throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting."



I have taken that advice to heart!



I will be writing a series of articles about the tenets of value investing. The next article will cover Margin of Safety.

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