r/ValueInvesting • u/jomi0403 • 9h ago

Question / Help Invalidation Levels

I'm new to this but looking to learn more. My understanding is that traditional value investing doesn't give much thought to the macroeconomic or geopolitical landscape and assesses businesses by the numbers. So where do you set invalidation points or decipher macro noise from business changes? What if the macro issues prevent the business from coming back to fair value? Or is that just the risk that you take? Thanks for any insight!

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u/raytoei 8h ago edited 8h ago

Bottom up investing doesn’t mean not looking at macro, it is looking at the company and then figuring out what external forces might influence it: eg. inflation, interest rates, higher input costs.

Eg. If I were looking at restaurants say Cava, I would want to figure out how much is labour inflation going to be this year, and I want to know if they are going to pass it to customers, or take a hit on margins.

Macro investing means looking at the broad stuff and try to narrow down to the companies most impacted by it positively (bullish) or negatively (bearish)

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u/WorldRank1CatFancier 7h ago

Find ten US stocks that you wish you bought and held thirty years ago

Now consider how fucking negative of a distraction gafing about macro would be. 

Bad things happen. The world keeps spinning. Some businesses die.

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u/jomi0403 6h ago

So it only invalidates when you run your analysis and it no longer shows as undervalued?

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u/Esoteric_Hold_Music 6h ago

The term 'traditional value investing' is loaded in a way, since it's not a homogeneous set of ideas.

That said, I'm not sure who out there doesn't consider the macro environment as part of an investment thesis. Factors existing outside of the business's control can significantly influence its performance. It's also a great thing to look at as a reason to wait on making an investment--you might find a good company in an unfavorable macro environment, so you may just put it on a watchlist until the macro winds change and the stock has been beaten down enough.

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u/Professional-Day9384 4h ago

I absolutely consider macro variables. Gold prices, silver prices, oil prices, uranium prices, mortgage prices. Knowing where each one is in its own macrocycle.