Best time for Value Investors

The current market conditions are what value investors live for.  Stocks all over the spectrum are trading at well below their intrinsic value.  I doubt that any one of us will be able to guess when the market will bottom, but that is not what we are concerned with.  Timing is of least importance.  Our major concern is of buying stakes in companies at prices well below their fundamental value.  If you had a long term investment horizon, wouldn't you rather be buying stocks when the DOW is at 8,000 rather then at 13,000.  

Most market participants, however, are in a lot of trouble during a market bottom.  Back in 2007, many people were fully invested in stocks as euphoria flooded the market.  Therefore, at the worst possible time to be invested, (when stocks are priced high) almost everybody was a market participant.  Unfortunately, they have no capital left over to invest when prices are cheap towards the end of the bear market, which is precisely the best time to be in stocks.

The best example I can think of right now is billionaire value investor Seth Klarman. Throughout most of 2006 and 2007 Seth Klarman had no more then 50 percent in stocks because he thought stocks were overvalued.  He wasn't worried about timing, as evident in the fact that he was probably over a year late on his call that stocks would greatly diminish in value.  He was worried about capital preservation and that the downside risk was much greater then the high price of equities.  Sure, he could have had greater returns in 2006 and 2007. (although he still generated over 15% return on investment...which is phenomenal given the fact he had only 50 percent of his money in stocks)  However, his returns have drastically beaten the market over the past year as stocks have come off the highs to now multi-year lows.  The best part about it is that Seth Klarman now has ample cash to deploy to currently buy stocks when they are at their lowest levels.  Ironic isn't it.