Value Investing Program
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 buy low and sell high. If done properly, average annual returns on an investment fund will exceed 20%. Value investing requires the investor spend some time creating a decision matrix for each security within a 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.Â
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.Â
This site’s value investing program is a dual channel program. The first channel is the Value Investment Club. Participation requires a subscription. The second channel is the educational channel. This channel is FREE. It teaches the reader about value investing. The end goal is to inform the value investor about the four core principles and how to perform analysis. This channel has three phases of lessons to teach value investing.
Value Investing – Value Investment Club
The facilitator on this channel has demonstrated a successful program of adherence to the primary business tenet of ‘buy-low, sell-high’. All transaction activity was recorded in real time on this site. In addition, he has created spreadsheets of the buy/sell points for the respective securities within the industry pools:
- Real Estate Investment Trusts
- Railways
- Fast Food Restaurants
- Insurance (Property and Casualty)
- Banks
- Entertainment
- Hotels
- Military Contractors
There are over 50 different securities involved. The respective buy/sell points are updated regularly and it is this information a subscriber receives. Information includes:
- Intrinsic Value Calculations
- Suggested Margin of Security (Buy Points)
- Expected Hold Period
- Sell Point
Each pool of investments has the respective spreadsheet as a downloadable document. In addition, associated research and industry standards require a log-in to review. This information is not available to the casual site visitor. The subscriber can use this information to create their own value investment fund with their own industry pools or if they so desire, mimic this site’s Value Investment Fund.
Each month, you get regular e-mails which provide recent activity and directives related to buys and sells of the pools’ potential opportunities. In addition, sometimes alerts are sent when opportunities exist with buys and sells of certain securities. In effect, you can mimic the performance of this site’s Value Investment Fund. The particular program venue provides the following benefits:
- Access to at least six pools of industries and their corresponding potential corporate information (currently 46 members in the aggregate);
- Each pool has its own decision matrix for buy and sell points;
- Documented intrinsic values for the respective corporations;
- Updated buy/sell points as companies report their financial achievements;
- Alerts as securities get close to their buy and sell points;
- Regular updates on the Value Investment Fund’s financial performance;
- Access to a wealth of knowledge about value investing.
Although not required, it is encouraged for the subscriber to learn about value investing. This is the second aspect of this program.
Value Investing – Education Channel
Learn about value investing and how you can easily acquire similar results with your investment fund. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth.
This channel provides the following:
- Lessons about value investing and the principles involved, Phase I of the program;
- Free webinars from the author following up the lessons;
- Charts, graphs and resources to use when you create your own pool, Phase II of the program;
- White papers addressing financial principles and proper interpretation methods, Phase III of the program; AND
- Some simple good advice.
When you join the Value Investing Club, you can access both channels. The first channel (Value Investment Club) requires subscription and is the one most readers are interested in; including access to the activity and models of the Value Investment Fund.
The second channel (FREE and openly available to any site visitor) is oriented around educating readers about value investing. There are three phases to this part of the program. The first phase consists of lessons 1 through 18 and introduce the concepts and principles of value investing. This Phase I – Four Core Principles of the program teaches about the one core tenet of value investing and the four principles that make value investing so successful.Â
The second phase consists of 80 additional lessons, Lessons 19 – 98. These lessons go into deep detail about the respective individual steps to create a pool of similar investments and design the respective buy/sell model used with value investing. Issues covered in great detail include:
- Understanding and interpreting financial statements;
- Calculating intrinsic value;
- Evaluating financial status and potential returns; AND
- Construction of a buy/sell model for the pool and its individual members.
Included in this phase are spreadsheets, formulas, graphs and resources for the value investor. An investment pool creation (hotels) is illustrated all the way through this batch of lessons. Phase II – Financial Analysis
The third phase is referred to as the sophistication phase. Here, the author explores additional tools a value investor uses to improve their overall return on investment and reduce risk. Topics covered include how to create counter positions that guarantee profitability; how to read the notes sections of annual reports to gain an advantage over institutional investors; when to dispose of underperforming investments and finally, learn how to utilize the formulas of value investing to leverage your return without any additional risk. Phase III – Sophisticated Investing