📖John Neff
Price vs Value Disconnect
Prices diverge from value short-term but converge long-term.
In the short run, the market is a voting machine; in the long run, it's a weighing machine. Prices can diverge wildly from value, but eventually converge.
🏠 Everyday Analogy
📖 Core Interpretation
In Price vs Value Disconnect, John Neff focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：The voting-to-weighing machine transition is inevitable.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Trimming Winners Before Black Monday (1987)
Neff reduced holdings in overvalued blue chips as valuations stretched in mid-1987, emphasizing his selling discipline based on P/E and earnings outlook.
✨ Outcome：When Black Monday hit, Windsor Fund losses were cushioned, allowing redeployment into cheaper quality names.
2
Exiting Overvalued Retailers (1991)
After a strong late-1980s run, Neff sold or cut retail names whose prices outran their earnings power, despite continued market enthusiasm.
✨ Outcome：Subsequent multiple compression hurt many retailers; Windsor under Neff avoided larger drawdowns and rotated capital into better risk‑reward stocks.
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