WORLDVIEW: When value investing fails – case against platinum and now JSE Limited

I've also been a long-time supporter of the value philosophy, strongly influenced by the buy-cheap, hold-forever approach of Berkshire Hathaway's chairman Warren Buffett. While value investing usually works well, in periods of radical change its reversion-to-the-mean approach can be found wanting. Witness newspaper companies, whose precipitous decline over the past decade has maimed many who tried to grab the falling knives.

Hindsight suggests the demise of a previously impregnable newspaper business model was rather obvious as the Internet age dawned. But not all disruptive signals are equally clear. In many sectors the Fourth Industrial Revolution hasn't yet hit. And like Hemingway's description of bankruptcy, major disruption usually occurs gradually – then suddenly.

One area where value investors are being suckered is platinum. They have been buying aggressively for five years already, attracted by share prices at 25% of the level reached during the last boom. Each mini rally is heralded as justification for their faith. Wrongly so.

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