Value Investing – Business & Economic Principles
This Site’s Value Investment Fund’s 2020 Return: 35.46% Current Fiscal Year To Date (130 Days): 29.9%
Dow Jones Industrial Average Return for 2020: 6.02% Dow Jones Industrial Average Return Fiscal Year to Date: 9.1%
S&P 500 Return for 2020: 15.28% S&P 500 Return Fiscal Year to Date: 10.4%
S&P Composite 1500 Return for 2020: 15.01% S&P Composite 1500 Fiscal YTD: 11.9%
Russell 2000 Return for 2020: 18.5% Russell 2000 Return Fiscal YTD: 35.0%
Value Investing – Business & Economic Principles is dedicated to the primary tenet of ‘Buy Low, Sell High’. Value investing is keyed to this business tenet of ‘Buy Low, Sell High’.
Value investing is a systematic approach to buying and selling financial instruments, more specifically, stocks. The ideal method is to find publicly traded stocks that are currently priced lower than their intrinsic value, buy them at a low price and sell them once the market price reaches maximum price tolerance. In effect, buy low, sell high.
Business Economics’ value investing program is designed for thoughtful investors and not for those seeking a get rich quick stock tip. For those of you unfamiliar with investing via security analysis, if you desire to learn and can appreciate a well-thought out and planned program, then this site if for you. For those of you that are currently knowledgable about the market and how to perform security analysis, you can immediately jump to Phase Two of the program and begin building your own industry pool of similar investments. You will have access to this site’s three existing pools of investments to augment your own portfolio.
The value investing concept was initially developed by Benjamin Graham in his first edition of Security Analysis written in 1934. The core premise of value investing is ascertaining what the intrinsic value of a particular stock equals. It is essential to purchase the stock at a low price in order to maximize a return on investment. In the revised edition of Security Analysis updated in 1962, Benjamin Graham identified a formula to calculate intrinsic value with stock:
Value = Earnings times (a constant of 8.5 plus two times an average expected growth rate over the next seven years).
In mathematical short-hand:
V= Earnings (8.5 + 2g)
Since the time period of the formula’s presentation, there have been many documented reviews and suggested modifications. One significant exception to the formula is that it does not take into consideration the time value of money. However, the formula is still accepted as the prima facie standard to this day. With the inclusion of financial analysis, industry knowledge and patience; value investing is considered the irrefutable leader of investing methodology.
Business Economics takes this formula and along with other intrinsic valuation algorithms educates the investor about this proven systematic method to buy and sell stocks. This method is rooted in four core principles:
- Risk Reduction – Buy only high quality stocks;
- Intrinsic Value – The underlying assets and operations are of good quality and performance;
- Financial Analysis – Use core financial information, business ratios and key performance indicators to create a high level of confidence that recovery is just a matter of time;
- Patience – Allow time to work for the investor.
The lessons, tutorials, webinars, white papers, spreadsheets on this site are designed to teach these four principles. In addition, this site has over 500 supporting articles that augment the lessons and the program. It is effectively the best resource center available to learn about and implement a personal value investment fund. The annual goal is to achieve 30% plus returns.
To prove the system works, the author created an investment fund example. Look at the results from the first year. The investment fund outperformed the DOW Jones Industrial Average by 353%! In Year 2, the Fund is currently 2.9 times the return of the DOW and 2.2 times the return of the S&P 500 and the corresponding S&P Composite 1500.
The current second year cycle of the Investment Fund started on Oct 22, 2020 with a $100,000 starting balance.
How is this possible?
The program advocates the creation of ‘Pools’ of similar industry potential investments. It is essential for the investor to become an expert in a particular or a few industries. Each pool consists of no more than 8 companies, all with similar market capitalization positions and compliance requirements. A value investor utilizes three or four pools of investments to take advantage of different economic wide, industry specific and corporate level influences on stock prices. Therefore, there are about 20 to 30 companies tracked for each member participating in this program.
A member of this website’s investment club has access to three pools provided by the club and all the associated analysis and individual corporate buy/sell models used to set the buy low and sell high points for each stock.
If you are interested in learning more, go to the Membership Program page under the Value Investing section in the header above.
Join the value investing club and learn about value investing and how you can easily acquire similar results with your own investment fund. Upon joining, you’ll receive the book Value Investing with Business Ratios, a reference guide used with all the decision models you build. Each member goes through three distinct phases:
- Education – Introduction to value investing along with terminology used is explained. Key principles of value investing are covered via a series of 18 lessons and several tutorials.
- Development – Members are taught how pools of investments are developed by first learning about financial metrics and how to read financial statements. The member then uses existing models to grasp the core understanding of developing buy/sell triggers for high quality stocks.
- Sophistication – Most members reach this phase of understanding after about six months. Many members create their own pools of investments and share with others their knowledge. Members are introduced to more sophisticated types of investments and how to use them to reduce risk and improve, via leverage, overall returns for their value investment pools.
Each week, you receive an e-mail with a full update on the pools. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth. Joining entitles you to the following:
- Lessons about value investing and the principles involved;
- Free webinars from the author following up the lessons;
- Charts, graphs, tutorials, templates and resources to use when you create your own pool;
- Access to existing pools and their respective data models along with buy/sell triggers;
- Follow along with the investment fund and its weekly updates;
- White papers addressing financial principles and proper interpretation methods; AND
- Some simple good advice.