Value investing is defined as a systematic process of buying high quality stock at an undervalued market price quantified by intrinsic value and justified via financial analysis; then selling the stock in a timely manner upon market price recovery.
The primary tenet of value investing is to to buy low and sell high. If done properly, average annual returns on an investment fund will exceed 30%. Value investing requires the investor spend some time creating a decision matrix for each pool of similar companies. This model is then implemented and updated on an annual basis. Value investing is in effect the exact opposite of day trading. Value investing takes advantage of time and this reduces the overall stress for a fund manager.
Value investing relies on four principles to ensure success.
The first is risk reduction by only working with high quality stocks; in general, work with the top 2,000 companies worldwide. Absolutely avoid penny and small cap financial instruments. Top companies reduce risk significantly due to their stability of earnings. Stability of earnings is the most important value derivative in business.
Secondly, value investors rely on intrinsic value to set the buy/sell range of market price for the respective stock. Intrinsic value is the core worth of a company. There are several different intrinsic valuation formulas and their application is a function of the company’s business model. There is no single universal intrinsic valuation formula.
In addition, value investors use financial analytics to validate operational and financial performance. This analysis allows the value investor to determine the most likely market price recovery point and its associated time frame to recover.
Finally, patience is required. Time is on the value investor’s side.
Value Investing – Value Investment Club
Join the value investing club and learn about value investing and how you can easily acquire similar results with your 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 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 and resources to use when you create your own pool;
Access to the 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
Every one of the six railroad stocks are at or above their all-time highs. As of today, February 15, 2020, the various stock prices are as follows: Union Pacific 184.65; Norfolk Southern $206.85; Canadian National $93.93;
Kansas City Southern $173.64; Canadian Pacific $270.86; CSX $79.59.
In addition, the price to book ratios are also higher than last quarter. The key question: is ...
During the last 30 days, the fund held 13.52375 shares (original investment of $2,500) and sold them on 01/17/2020 at 9:40 AM when the price in the market hit the target under the value investment principle at $207.17. The value investing principle (simply stated) required the share price to hit the prior peak price which ...
It’s the end of the quarter and time to report on the railroad fund. The fund started on 10/21/19 but I’m resetting the fund’s timing to the end of the quarter so that future quarterly reports tie to actual calendar quarters. The market value of the fund is $10,392.74 and I started out with $10,000 ...
Union Pacific’s stock carries the highest price to book ratio among the six Class I Railways. It is about a 1.43 times factor over the next best price to book ratio of CSX at 4.73. Strong price to book ratio investments infrequently have deep or extended price depressions. Therefore, an investor must be patient ...
Today is November 15, 2019 and Canadian Pacific Railroad recovered in accordance with my railroad fund investment model to $241.47 per share. The value investing model automatically sold at $241.47 and the price per share continued to climb to $241.86 when the market closed at 4 PM. This sale generated a 9.31% return on the investment ...
Railroad stocks are solid and steady investments. There is limited downside risk and adequate historical data to illustrate buy and sell points for an investor. If properly applied, an investor should earn yields of 18 to 30% year on year. Learn how to develop the investment model for this particular industry.
One of the benefits of ...
These six are behemoths when it comes to transportation. All have revenues greater than $2.5 Billion per year and hold at least $4 Billion in fixed assets. The key to this investment is the asset allocation model. A common thread that binds all of them is that the asset side of the balance sheet is ...
The transportation sector of the United States economy is composed of nine industrial groups. One particular group moves more volume of tonnage based on ton miles than any other form of transportation – Railroads. In accordance with the Federal Department of Transportation, railroads move 39.5% of all freight in the US (based on ton miles ...
Valuation ratios are the only group of business ratios that are externally and not internally driven. The market dictates valuation ratios. All three core valuation ratios are determined by the market price of the stock. All three have the same numerator, the market share price or market capitalization value of the company.