Cyclical stocks tend to be reliable profit generators in a value investor’s portfolio. Cycles exaggerate the valuations because they cause uncertainty in the market. So arguably, value investing should work very well. In practice, it can be hard to identify the right investment candidates and pick the right time to invest.
Best Value Investing Blogs, Tips and Articles
Value investing is an investment strategy popularized by Ben Graham and has proved to be a superior investment strategy over long investment horizons. We all like to buy products and services on sale - value investing just extends the concept to buying and selling stocks. It tends to simplify the investment process by eliminating confusing and generally useless concepts often part of the advanced financial and management academic programs. The success as a value investor arises from understanding the business and also by staying disciplined. Therefore, value investing is as much a financial concept as it is a change in investor behavior.
As many enterprising value investors realize after many years of "value investing" in practice, just learning the concepts and methods does not make you into a successful value investors. If this was enough, you would see a large number of very successful value investor mutual fund managers with enviable long term track record. Sadly, it is not so.
In addition to learning the methods and tools of value investing, you have to acquire a certain behavioral attributes that define a value investor. A sincere appreciation of value, a healthy rejection of whatever market sets as the price as a true reflection of value or a given asset, and the guts to stay with own analysis and research for a long period of time DESPITE an uncooperative market.
In fact, the markets are normally against you for most of the time you are invested in any undervalued asset. This created a great opportunity to acquire the asset for cheap, and you did. Wouldn't it be great if once you buy something, the market quickly moves to realized the value for you? Unfortunately, this is not how it works in reality, so you need to be able to call upon a set of behaviors and beliefs to be able to wait patiently for your profits.
At Value Stock Guide, I believe that there is enough material out there that teaches you how to calculate a certain ratio, or create a discounted cash flow model. This is not the secret to investing successfully for long periods of time. The secret to investing successfully for long periods of time is how you act and react at the edges. Do you display conviction in your ideas when the stock goes against you, or do you fold meekly? How do you build up this conviction? Isn't taking the easy way out like everyone else more comforting? Why do you invest - is it because you like the thrill of buying and selling, or is it because you patiently want to see your portfolio grow? Can you sit and watch the paint dry for days, if you know that at the end of the week there will be a substantial reward waiting for you?
I tackle many behavioral and soft side of value investing on these pages. Sometimes I also talk about the concepts. No one has ever become a good investor without building their core base of correct foundational investing attributes. You can do this here.
The articles below explain the concept of value investing, tips and tricks including articles aimed at beginner and advanced investors. Many of the concepts presented here are result of the evolution of value investing practice over time. Original value investing research and strategies are also posted here.
At some point you will wish to start using some of these ideas in your investing. We can help you find the best stocks to buy now and create a well optimized and high performance portfolio.
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In 1939, Sir John Templeton borrowed $10,000 and used it to invest $100 in every stock listed on NYSE selling for under $1. In all, he purchased 104 different stocks. No regard was paid to the quality of the business, profits, etc. In fact, 37 out of these 104 companies were already in bankruptcy.
3 years later, Sir John had profits in 100 out of the 104 stocks he had purchased.
Earlier I explored reasons why value investing beats growth investing over a long term. The article was based on the data from the US stock market going back many decades. In this day and age when investors often invest in global stocks either through ADRs or via global funds or ETFs, we still need to ask if the investors are better off preferring value vs. growth stocks.
I have followed Guy Spier for many years, ever since he and Mohnish Pabrai plunked down $650,100 in an auction for lunch with Warren Buffett. So when the publisher palgrave macmillan wanted to send me a review copy of his book “The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment”, it was a quick yes.
Do you find the post useful? Please share Share2 Tweet0 Most would be value investors understand the principles of value investing but falter in the practice. The reason often does not lie in what you know, but more in how you handle your portfolio. The basic precepts are simple – buy a stock if the… [Read More]
As a value investor, two key decisions make or break your investment success. You have to know when to buy a stock. You also have to know when to sell stocks you own. Both these decisions can be fraught with self doubt if you still seek validation from the market behavior to justify your actions.
Do you find the post useful? Please share Share2 Tweet0 Briefly, the confirmation bias occurs whenever individuals deliberately search for information that corroborates whatever decision they have either made, or would like to make. This is clearly hazardous to the investing process because it means that investors may really like a company for some inexplicable… [Read More]
Value stocks vs growth stocks war rages on. I frequently get emails and tweets from investors looking for the next growth stock. I have to politely excuse myself from this conversation. Growth investing is not my forte and in a way, very few ever do growth investing with any reasonable levels of success. This of course, is for no lack of trying.
“Not everything that counts can be counted, and not everything that can be counted counts.” -Albert Einstein Editor’s notes: Value investing is often seen as a science of carefully balancing various fundamental ratios, judging probabilities and running some arcane discount models. Ben Graham was certainly an advocate of looking at a business through the lens… [Read More]
JP Morgan (JPM) came out with its list of top 9 value stocks for 2014. Best Buy (BBY) made the list as as stock that presents clear value for 2014. According to them, the company has made the competition in its big box format irrelevant, and the improving economic trends and broader GDP growth should… [Read More]
This is the often repeated mantra: If insiders are buying the stock, it is a positive indicator. After all, who better to know the current business environment and the future prospects of the company than the insiders.
While this argument seems logical, this over simplifies what insider transactions may mean.
The following is an un-edited excerpt from the last newsletter I sent to my Premium members. I hope you find this a useful philosophy to adopt in your investing. It works for me and should work for you as well. There are a couple of points in my investment philosophy I want to bring out…. [Read More]
The following picture neatly encapsulates what an investor does, as opposed to a speculator. More to the point, it lays out the core beliefs of a value investor. What it does not say is that by NOT focusing on the profits but on the process instead, profits come as a byproduct. One thing that the… [Read More]
This interview dates back to 2011. As you know, Klarman generally does not appear with media, so any interview you can find with him is pure gold. In this interview, Klarman talks about his philanthropic cause and spends a lot of time imparting his experience and wisdom on value investing. (For those who do not… [Read More]
There is a significant difference between patience and indecision. When recommending or buying a stock, I will often wait patiently until the time and the price is just right. However, once the purchase decision is made, the execution is quick. Same holds for selling the stock. For example, if a stock is within my buy… [Read More]
Q1 has ended for the market in 2013 and the S&P horse that bolted off the gates at the beginning of the year has not yet slowed. As of today the S&P 500 has chalked up a 10.60% return YTD, including dividends. If this was not enough, the index today also bested its previous high… [Read More]
Think back to a moment when you were younger, a teenager perhaps, and there was something you wanted to do because it was suddenly cool and it seemed like everyone you know—and many people you didn’t—were doing it. Just as you’re about to dive into whatever the fad of the season is, someone (a parent, teacher, observant adult) stops you and tells you no. “But everybody’s doing it!” You whine. “And if everyone jumped off a bridge, would you do it too?” If this exchange is familiar to you, then you already know something about herd mentality.
You are rational with your money. You spend weeks agonizing over the new microwave oven. You read countless reviews and compare features and prices. You worry about risk and insist on a good warranty. You demand value for every hard earned dollar you spend.
For value investors, active portfolio management remains much more an art then science. There is sufficient value investing literature available that describes the methods and processes of fundamental analysis to find appropriate value stocks. Not much is said about how you might go about creating an optimum portfolio structure that includes appropriate stock selection and maintenance over time.
In the previous article in this series, we looked at the lifecycle of a business from startup to growth, maturity and decline. We also learned that value investors typically look at the businesses in the mature and decline stages, although there are always exceptions. In this article on BCG Matrix, we will build upon this basis to see how companies can and do act in practice to maximize their value growth.