Value Investing

Value Investing

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 InvestingValue 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
  • Some simple good advice.

Value Investment Club

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    • Value Investment Fund Status Week 19 – Another Good Week

      Value Investment Fund Status Week 19 - Another Good Week
      The Club’s Value Investment Fund increased another 4.2% during this past week. The initial goal was to achieve a 35% return for the entire fiscal year; this past week surpassed that goal. The facilitator believes the Fund’s total return will approximate 44% by fiscal year end (October 21, 2021).
    • Value Investment Fund – Status on February 28, 2021

      Value Investment Fund - Status on February 28, 2021
      The Club’s Value Investment Fund leaped forward during February 2021. The Fund grew 11.31% driven by increases across the board for all investments. Total actual gain was $13,207.07 as illustrated in report below. As stated multiple times throughout the lessons and tutorials, high quality stocks have less risk and thus react remarkably well when the market ...
    • Dividends and Earnings Analysis – Railroad Stocks

      Dividends and Earnings Analysis - Railroad Stocks
      Dividends and earnings analysis is one of the core requirements of calculating intrinsic value via security analysis. There is a relationship between dividends and earnings; one is a function of the balance sheet, the other is tied directly to the financial performance of the company as reported on the income statement. In general, there must ...
    • Value Investment Fund Status Week 17 – Three in a Row

      Value Investment Fund Status Week 17 - Three in a Row
      Three good weeks in a row, the Club’s Value Investment Fund increased another 3.6% during this past week. That’s three weeks in a row with at least 3% improvement over the prior week. This past week’s growth was driven by the banking pool of investments, specifically the gain from Wells Fargo. Wells Fargo’s total balance ...
    • Sold Union Pacific PUTs

      Sold Union Pacific PUTs
      Union Pacific is a high quality stock. Over the last twenty years, this company has  never failed to earn a profit. During this time period, there have been two recessions. The simple fact is that Union Pacific is a solid investment. The company has paid a dividend for the last thirty years. Its current yield ...
    • Value Investing – Setting Buy and Sell Points (Lesson 16)

      Value Investing - Setting Buy and Sell Points (Lesson 16)
      Setting buy and sell points for any investment security determines the investment’s final return. If the buy is made too early while the security is falling in price, the value investor loses out on not only additional margin upon the sale of that security, but also reduces their margin of safety associated with the intrinsic ...
    • Value Investment Fund Status Week 16 – Another Good Week

      Value Investment Fund Status Week 16 - Another Good Week
      Another good week, the REIT pool of investments improved another $4,094 driven by Equity Residential and UDR’s actual results from the 4th quarter of 2020. Although the market responded positively to the results, the facilitator believes that UDR didn’t perform as well as Equity or Essex during the last quarter. This requires an in-depth review ...
    • Value Investing – History and Modern Day Concept

      Value Investing - History and Modern Day Concept
      There are tens of different definitions or interpretations of value investing. There is no single finite definition as even Benjamin Graham or David Dodd didn’t even use the term in their famous book, Security Analysis. What Graham and Dodd advocated in their writings was how to use multiple different financial tools, formulas, principles and economic ...
    • Value Investment Fund Status Week 15 – Amazing Movement Forward

      Value Investment Fund Status Week 15 - Amazing Movement Forward
      What a great week! Essex Property Trust reported their 4th quarter results and as expected, the stock’s market priced jumped almost $20 higher per share. The interesting part is that it wasn’t as if Essex reported great results; actually, their financial profits were in line with the third quarter profit. The market was holding back ...
    • Calculating Intrinsic Value for Bank Stocks

      Calculating Intrinsic Value for Bank Stocks
      Financial institutions, including banks, are highly regulated, extremely leveraged, and susceptible to interest rate fluctuations. Due to this unique exposure, calculating intrinsic value for bank stocks requires modification of the most popular valuation models. There are about five widely accepted intrinsic valuation models used with determining the core price for stock of most companies. Novice ...