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.
Site’s Value Investment Fund’s 2020 Return: 35.46% Current Year To Date 06/12/21 (163 Days): 38.53%
Dow Jones Industrial Average Return for 2020: 6.02% Dow Jones Industrial Average Return Year to Date (2021): 12.65%
S&P 500 Return for 2020: 15.28% S&P 500 Return Year to Date (2021): 13.08%
S&P Composite 1500 Return for 2020: 15.01% S&P Composite 1500 YTD: 13.75%
Russell 2000 Return for 2020: 18.5% Russell 2000 Return YTD: 18.28%
The third pool of similar investments used with the Investment Fund is banking. Banking is a highly regulated industry, governed by the Federal Reserve, and thinly capitalized in comparison to other industries. The balance sheet is strongly weighted with current assets and liabilities. It is rare for the stock to trade at more than 1.5 times traditional book value. The top three key performance indicators are 1) the spread between interest earned and interest paid; 2) revenue from non-interest sources; and 3) the quality of the loans issued.
There is different tack taken with reading and interpreting a bank’s set of financial statements. The articles that follow in this area explain the respective interpretations of financial reports; how to key in on important bits of information; and how to properly set the buy and sell points for the respective member stocks.
The key advantage of bank stocks is the increased volatility of the stock’s price. In general, the stock’s price for banks vacillate at a higher frequency than the other two pools of the Club’s Investment Fund. This allows for short-term opportunities to fill the voids when holding cash. There is an in-depth explanation of this business principle in the articles below.
In order to access the articles, models, spreadsheets and tutorials related to the banking pool, you must be a member of the Value Investment Club. To join, go to the Membership page on this site (located in the value investing tab in the main menu above).
Value Investing Episode 1 – Introduction and Membership Program
Below are articles related to the banking pool. Only the excerpts are available to non-members. Full access to the respective article requires membership status.