The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere

Chapter 4. Tevye Was a Rich Man

The Quintessential Value Investor

I'd like to introduce you to my hero, Tevye the Milkman. Didn't read about him in your investing books? Tevye came to life in the stories of Shalom Aleichem, and later to the silver screen in the musical Fiddler on the Roof.

Tevye is my hero not just because he is a font of worldly wisdom, or because he can sing, or because he is a great and kind father, or because he romances the memories of my ancestors. I honor Tevye because he is a pragmatic value investor.

Tevye lives in a small village in eastern Europe; he is a farmer and a milkman. He may not be familiar with the maxim that the value of any asset is the present value of the asset's future cash flows, but that doesn't prevent him from applying these principles.

Tevye's story highlights what value investing is all about: analyzing an asset be it a cow, a stock, or a bond by assessing its risk; valuing it or figuring out what it is worth; and calculating a suitable purchase price. If an asset trades at the desired price or below it, you buy it; if not, you wait patiently until it gets to your target price. That's it!

Unfortunately, market noise often deflects us off this simple path, but it really is that simple. I often think about Tevye to keep my focus amid the daily noise.

Meet Our Hero

Tevye needs to buy a young cow. He plans to name her Golde, after his first wife. Based on his previous experience, he expects Golde to produce about 2,500 gallons of milk a year, ...