Wednesday, November 14, 2007

Digging for Value in the Real Estate Rubble by Zeke Ashton

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But as all value investors know, fear brings opportunity. One of the axioms of fear-based selling is that everything viewed as being in proximity to the danger gets sold. Panic selling does not lend itself to careful consideration of relative risk. The market often does not begin to discriminate between those securities with truly high risk and those with low risk until after the crisis has abated. Once time has allowed for a more appropriate discernment of value and risk, the value of those securities that were unjustly marked down inevitably recover the full measure of their value. There is opportunity in virtually any crisis for those investors willing to carefully pick through the rubble. It is never easy, and getting the timing perfect is virtually impossible, but we believe that the recent fear in the real estate sector has provided us with actionable bargains.
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