Today we talk to Jose Mayora about wall street blind spots! As author of Wall Street’s Blind Spots, a new book about the realities of value investing in a market dominated by mega-cap growth stocks, Mayora explains that true value investing is not about low P/E ratios but about buying businesses at a meaningful discount to intrinsic value. He emphasizes disciplined, bottom-up research, geographic and sector diversification, and concentrated portfolios to uncover overlooked opportunities. We also explore the psychological challenges of investing through crashes and euphoric markets, the tension between patience and performance when managing other people’s money, and the risks of over-investment. Today we discuss... 

• Jose Mayora shares his background in investment banking, economics, earning the CFA, and co-founding DeVita Valley Growth Fund with a disciplined value-oriented philosophy.
• The discussion highlights how traditional value strategies have lagged during the dominance of mega-cap tech stocks, particularly the “Magnificent Seven,” over the past decade.
• Mayora emphasizes that avoiding high-multiple stocks purely on valuation optics can cause investors to miss strong businesses compounding at high rates.
• The conversation underscores the importance of remaining impartial and avoiding confirmation bias from sell-side research, headlines, or popular narratives.
• Mayora argues that concentrated portfolios of 10–16 positions are more realistic for true value investing, as finding dozens of genuine bargains in expensive markets is unlikely.
• We examine how broad market crashes create opportunity because markets become indiscriminate, often punishing high-quality companies alongside weaker ones.
• Historical examples like Google during the 2008–2009 crisis illustrate how strong businesses temporarily trade at compelling valuations during downturns.
• The psychological challenge of buying low-quality “junk” stocks for sharper rebounds versus sticking with durable high-quality companies is debated.
• They discuss how long recoveries—such as after the dot-com crash—can test investor patience even when valuations are compelling.
• Mayora explains that maintaining close communication and philosophical alignment with investors helps navigate inevitable periods of underperformance.
• They debate missed opportunities in large-cap tech and the difficulty of staying disciplined when high-momentum stocks dominate returns.

What Truly Is Value Investing?

By Jose Mayora, CFA & Author of Wall Street’s Blind Spots

Value investing is one of the most frequently discussed—and frequently misunderstood—approaches in markets today. My conversation with Kirk highlighted just how important it is to revisit its true meaning, especially given today’s investing environment. Although we only briefly touched on the idea that value investing has underperformed over the past decade or so, this topic deserves deeper attention.

That conclusion can only be reached if we assume a narrow and incomplete definition of value investing. I explore this distinction in my book, which you can find at my website.

Most investors today equate value investing with “cheap-looking stocks”: companies that appear mature, slow-growing, and that trade at low or “favorable” financial ratios. These usually include the price-to-earnings ratio (P/E), the market-to-book value ratio (M/B), and similar metrics.

But this interpretation only captures a small fraction of what value investing actually is.

Value Investing Is About Price vs. Worth—not Low Ratios

At its core, value investing simply means trying to buy assets—typically stocks—at a price that is below their worth. When you can buy a company at a discount to its intrinsic value, the chance of permanent loss is low (thanks to the margin of safety), and the chance of meaningful upside is high (because you benefit from both attractive cash-flow yields and the potential for price appreciation when the market eventually recognizes the company’s true value).

The key idea is straightforward:

Undervalued opportunities can appear in any kind of company—not just in mature firms with low P/E or M/B ratios.

If you assume value investing only applies to these conventional “value stocks,” then the past decade of relative underperformance would indeed be discouraging. That limited definition makes many believe value investing is outdated.

But the reality is different.

Value Exists Across a Much Wider Spectrum

If you understand value as the relationship between price and worth—rather than as a set of financial ratios—your opportunity set becomes far broader. You are no longer constrained to mature industries or slow-growth businesses, and you are not destined to underperform whenever those categories fall out of favor.

Value can absolutely be found in early-stage, high-growth businesses.
It can also be found in companies trading at what appear to be high P/E or M/B multiples. That’s because:

Financial ratios measure price—not value.

Ratios might occasionally reflect value well, but just as often they don’t. Price reflects today’s picture. Value reflects expectations about tomorrow.

You can have a company trading at 8x earnings that is actually overvalued, and another trading at 35x earnings that is undervalued. That’s because these ratios are based on current financials, which say little about the future cash flows investors will ultimately receive.

Those future cash flows—not today’s ratios—determine value.

Why High Ratios Don’t Necessarily Mean “Expensive”

Consider an “inexpensive” 8x P/E stock whose earnings are expected to fall 50% in short order and then stabilize. Even at 8x, that stock may be expensive relative to its future earnings power.

Meanwhile, a “pricey” 35x P/E stock may be reasonably valued if its earnings are expected to grow tenfold over the next five years. In that case, the headline ratio tells you very little about the true opportunity.

This is why the key question is not whether a company is mature, slow-growing, or has a low P/E. The critical question is:

What expectations are embedded in the current valuation?

Understanding Embedded Expectations

Every valuation implies a certain path for future cash flows. As a value investor, your job is to figure out what that path looks like and whether it is realistic.

Some of the questions you might ask include:

• What needs to happen to the company’s cash flows for me to earn a reasonable return?
• Does the business need to grow? If so, by how much and for how long?
• Does it need margin expansion, or is revenue growth enough?
• Does it need to reinvest retained earnings at exceptionally high rates of return, or will moderate returns suffice?

Every stock carries these embedded assumptions—its “hurdles” that must be met for an investor to achieve an acceptable outcome. A value investor’s responsibility is twofold:

1. Identify those hurdles.
2. Determine whether the company can realistically meet them.

This perspective transforms how you evaluate the meaning of both “cheap” and “expensive.”

Higher P/E, Higher Hurdles—but Not Necessarily Higher Risk

A higher P/E ratio typically suggests higher embedded expectations: faster growth, stronger reinvestment returns, and more robust business performance overall.

But this does not automatically make a high-P/E stock expensive.

A company priced for 15% annual growth may actually be capable of 25%. If that’s the case, the embedded expectations are not demanding—despite the seemingly high ratio.

On the other hand, a low-P/E company may have modest expectations that appear easy to achieve. But if the business is facing structural decline or competitive pressure, even those modest hurdles may be difficult to meet.

Again, the ratio itself tells you little.

The relationship between expectations and reality tells you everything.

Value Can Be Found Anywhere

Once you recognize that P/E ratios reflect expectations—not intrinsic value—you also recognize that value opportunities exist across the full spectrum of companies.

The simple goal is this:

Find companies whose implied expectations are lower than what they can comfortably deliver.

This opens the door to a more diversified and intellectually honest approach to value investing. You are not bound to mature industries, and you are not systematically excluded from fast-growing companies—so long as their prices underestimate their future potential.

Why This Broader View Helps Prevent Underperformance

If you confine yourself only to mature companies with low P/E ratios, you will underperform whenever that category is out of favor. That pattern has been visible at various points during the past decade.

But if you broaden your definition and look for undervaluation wherever it exists, your portfolio will naturally include opportunities that benefit not only from intrinsic undervaluation but also from favorable market trends.

In practice, this means you might own:

• A handful of high-growth companies, but only when their valuations underestimate their future cash-flow potential.
• Traditional low-multiple companies, but only when their implied expectations are comfortably achievable.

When you buy any stock—growth or mature—at an undervalued price, you gain both the margin of safety associated with value investing and the potential upside associated with future outperformance.

That combination is what helps you avoid underperformance as a value investor, regardless of what happens to be popular at the moment.

For readers interested in deeper discussions on expectations analysis and intrinsic value, I share more frameworks in my book Wall Street’s Blind Spots.