Value Investing - Is It For YOU?
Is value investing for you?
Here is the video version: VALUE INVESTING DEFINITION, KEY FACTORS
Concerns related to value investing come from wrongly defining it.
The key value investing factors and beliefs in my opinion are:
1) A value investor is first and foremost a business owner.
2) Business earnings are the driver of investing returns.
3) Growth is an essential component of value.
4) Value investors look for the best growth, best earnings but always consider the margin of safety.
5) The margin of safety can be found in a low stock price compared to intrinsic value based on conservative business and economic estimations.
6) Business risk is to be avoided and patience is required to buy low risk businesses at a fair price.
7) Unlike most other investing philosophies, value investors look for low risk to achieve high returns. By focusing on minimizing the downside, what is left is only upside.
8) Intrinsic value is key – it is calculated by looking at what is the present value to you personally, of all the future cash flows a business will likely deliver from today to judgement day.
9) The lower the stock price is, below your intrinsic value calculation alongside a margin of safety with conservative calculations, the lower is the risk of investing. Consequently, as the stock price increases, the risk becomes higher.
10) Bottom line, it is all about comparing and finding the lowest risk, highest return opportunities for your portfolio that will lead you towards your financial goals with the highest possible level of certainty.
Value investing is something that works all the time if done as described above, it will certainly not be the hottest strategy at any time, but will most probably lead to your investing goal. It is up to you to know whether this is or not something for you!