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]
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.
View articles in other categories: Dividend Stocks, Large Cap Stocks, Mid Cap Stocks, small cap stocks, Macro-economic, Investing Questions, Business, Personal Finance, Investment Guide, Investment Definitions
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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.
Business life cycle is one of the key constructs to conceptually determine the different stages of a business. These stages are important for an investor to know as they tell you whether the company will grow, sustain or decline. This has tremendous implications on your investments.
Small cap stocks generally have a liquidity problem.
This is one of the reasons why most investors stay away from small cap stocks. This is also one of the reasons why good undervalued stocks are easier to find in this asset class.
The market for highly liquid stocks is also normally highly efficient. The price you pay for the convenience of having your transaction execute in seconds (instead of hours or sometimes days) is returns that are at best average.
In my 18 years of investing in small cap value, I have found that lack of liquidity is hardly ever an issue. Part of it is just practicing good investing habits. The other part is understanding precisely what we are doing when investing in small cap value.
Here is a riddle. Despite countless studies proving the superiority of value investing over growth or indexes, investors do not normally invest for value. Why is that? Don’t they want better performance and greater wealth?
If you are a shareholder, you generally welcome any share repurchase announcement. The math is simple, you think.
If the company remains valued at the same level in the market, the less number of shares this value is divided by, the more the value of the remaining shares. It is a way of engineering a higher share price.
What most investors forget to take into account is that the company is using its own cash up to buy these shares back.
These shares do not magically disappear.
Solar Stocks are in Cyclical Down Cycle The solar supply chain has been decimated and solar stocks are struggling due to over supply of Polysilicon and excess capacity. So what does this mean for the solar stocks and when is a good time to invest in them? Like semiconductors and most other industries that require… [Read More]
Be fearful when others are greedy and be greedy when others are fearful – W.E.Buffett Or, contrarian investing pays. Bill Gross of Pimco, the bond man himself, writes in his monthly market analysis that the "cult of equity" is over, and the consistent long term returns for stocks since 1912 will be viewed as a… [Read More]
Affordable Care Act is Here to Stay With the Supreme Court ruling the individual mandate in the Affordable Care Act as constitutional, it is time to start looking at how this law can affect your investments. Some of the effects are direct while some others are indirect. 1. Some companies and their stocks benefit A… [Read More]
Stock Recommendations – Popular is Not Often Profitable You would think that the financial media, even the reputable ones, have your best interest in mind when they publish their stock recommendations. You would be excused for believing that they actually do some research before they publish their analysis. If you do, you are giving them… [Read More]
Do you find the post useful? Please share Share0 Tweet0 Corporate DNA The Corporate DNA is not a mythical term. It is much more than Corporate Identity. It is not the same as branding. It is a sense of history that reflects in the way a company conducts its business. It is entirely internal. To… [Read More]
Soon after purchasing the newspapers owned by Media General, Warren Buffett has now indicated that he may buy more newspaper assets in the coming years. According the the memo posted on the Omaha World-Heralds Buffett remarks "We will favor towns and cities with a strong sense of community, comparable to the 26 in which we… [Read More]
Buffett already owns the Omaha World-Herald and Buffalo News of New York along with a stake in Washington Post, and now he is buying up most of the newspapers owned by Media General. Berkshire Hathaway (BRKA) is paying $142 million for 63 local newspapers and will also loan $400 m to the company and provide… [Read More]
It is 2:00 am Eastern time as I write this and about 9 hours past since the JPM conference call. The bank with the self professed “fortress” balance sheet fessed up to a bit of binging on the synthetic credit derivatives. $2 B in losses have been realized in April and Dimon expects another $1… [Read More]