One of the biggest questions lingering in my mind over the last few weeks has been one that I'm sure all value investors regularly struggle with. It relates to those companies that just keep going down. As value investing is inherently contrarian, these businesses often pose painful questions for us - as they present us with a firm that often looks incredibly cheap on a number of bases but simply keeps falling. Since I don't believe in any sort of market timing at all - thinking it more to be a backward-looking, data mining exercise, the thought of 'jumping on the bandwagon' - shorting the stock simply because it's going down - is ludicrous to me. That said, it sometimes feels like that's the way they're destined to go; like HMV, Game, or Thomas Cook Group, the three which sit in my mind most currently - see chart below.

Shorting the stock isn't always bad, of course; just foolish for me to do unless unless I find fundamental reasons to short the stock. My portfolio doesn't currently have any short positions - and nor do I plan to add any soon - but from a theoretical perspective, I have absolutely no objection to shorting a stock that you think is overpriced by the market. The trouble is, it seems to me, the set of tools I use to value stocks loses some of its predictive power when a stock heads into the death spiral Game, HMV and Thomas Cook look to have entered. Am I simply being lazy and looking for reasons to avoid valuing these stocks? Perhaps I am, but bear with me!

My valuation techniques, largely, focus on earnings. All of my companies were profitable last year (Barratt are a fine-line, but were profitable pre-exceptionals). The majority of my companies are conservatively financed, in my opinion. None of them have experienced particularly spectacular growth in the last few years - they are predominantly in industries likely to be defined by the market as receding, not growing. In some sense, then, they're on the 'easier' scale of companies to value. I don't think that's a bad thing, and nor do I make the jump to thinking that I'll be accurate because of it - but there is a reason I don't try and ascribe a value to tech or growth companies - I think it requires a completely different…

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