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
Today, I sold 59 PUT options for Union Pacific with a strike price of $170.00 with a final date of February 19, 2021. PUTs are simply selling insurance that if the stock price drops to $170 per share, the Value Investment Fund will have to buy them from the owner of the puts. Today, the ...
A second purchased made at close of business yesterday is 48.9644 shares of Essex Property Trust, another REIT investment. The total cost per share including transaction fees is $204.23 per share (closing price is $203.23). Total investment in Essex is $10,000. Cumulative total investment in the Value Investment Fund is $20,000 as of 10/23/2020.
I expect ...
This post is to record the value investing fund’s purchase of 192.12296 shares of Equity Residential, a real estate investment trust (REIT) for the value investment portfolio.
As a result of my ‘Lessons Learned’ article that will be completed and posted this week, I had to broaden my portfolio and include a counter cyclical portfolio of ...
On October 22, 2019 the Dow Jones Industrial Average was 26,823 (market opening). Today, October 18, 2020 the Dow Jones Industrial Average is 28,607. The DOW improved 6.65% in the course of one year (technically 361 days).
On October 22, 2019, I started out with $10,000 in a value investing based railroad fund. Today, the fund ...
On 09/14/2020, Norfolk Southern Railroad’s price hit $220.13 at opening. I set my sell point via an automatic sell at $219.88 and thus the shares automatically sold at $220.13. After paying a $1 per share fee, the railroad fund that I write about on this site generated $10,750.65. My cost basis in them was exactly ...
Railroad stock offers good upside potential with very little risk involved. This particular railroad fund is outperforming the DOW Jones Industrial Average by a factor of three. Learn about value investing from this series of articles.
A few months ago, many might have predicted that 2020 would be a difficult year for railroad stocks. The shutdown of the U.S. economy in March caused transportation and shipping activity to slow to a crawl, and to be sure, most related stocks crashed. Furthermore, the oil crash specifically painted a grim long-term picture for ...
49.060606 Shares of Norfolk Southern Corporation – Closes at $175.82/Share FMV = $8,625.84 (Avg Buy Price/Share = $203.83 for Basis of $10,000.00)
Cash Position including recent dividend payment from NSC = $1,555.16
Total Fund Balance ...
Value investing is a principle of investing whereby the investor uses ratios and comparative analysis of similar investments over an extended period of time. In this case, I compared the six publicly traded Class I railways in the United States. Then based on the results, I exercise buy and sell points for each stock within ...
There are six Class 1 Railways traded in the US market. If you look at each railway’s respective annual and quarterly filings, all of them report certain key performance indicators (KPIs).
There are four key performance indicators. The first three are incrementally more valuable. Of the four, revenue ton miles is the most important as ...