Just as when Police Detectives cite the reason they prefer to work homicide cases as being because the dead do not shoot at them, growth investors can learn that using the vulture method of buying value at a discount, is much safer than jumping on a wave of earnings that is exposed to countless risks. The core lesson being that long term growth can change overnight, whereas buying at a discount to true value can never fail.
Of course this flies in the face of what many feel is the right thing to do by betting on winners, when the vulture will tell you that the field is littered with previous winners that fell prey to some aspect of the market, management, poor controls, or any other number of unmitigated risks. Most investors do not want to think of themselves as capitalizing on the misfortune of others, yet growth investors should look to the spoils of the vulture and realize that winners do not always win and few keep winning for long periods of time.
Second to understanding the true risk in overpaying for future hopes in the form of earnings, the growth investor can benefit from the vulture’s ability to identify the true value and underlying profit potential for each aspect of a business. This understanding of underlying value, earnings production capacity, and potential of portions of a business if unleashed from the whole, can give the growth investor insight into management’s maximization and allocation of resources as well as their understanding of their business as a whole. Any growth company that is under utilizing parts of the company could signify a management team that is a one trick pony and will not be able to adapt to changes in market conditions, thus preserving shareholder value.
Lastly, growth investors can learn to hold management accountable to maximizing underlying value should the company began to falter. Why growth investors sell to vultures when they themselves could realize at least some portion of remaining value is a mystery for the ages, after all, they hold ownership. In most cases, the growth investor could mitigate losses through maximizing liquidation and potentially salvaging portions of companies, leveraging equity into new companies that themselves could become a growth investment opportunity.
Growth investors and vulture’s alike are both necessary for an efficient market. Someone needs to build and take risk while there must be others that come in to clean up any mess or failures left behind. Both serve their function and both are honourable endeavours. The growth investor needs to realize this and use the tools of the vulture to make certain that they choose the growth companies that are truly maximized, have underlying assets and value that can safeguard losses and if all else fails, deny the vulture the opportunity to reap massive rewards by pushing the limits of available options should problems arise. Vultures spend all of their time waiting for the situation to go beyond hope, the growth investor should consider not selling out and fighting until the very end.