Value investing is a type of investing strategy that focuses on buying assets only at a price that promises both “safety of principal and a satisfactory return”, in the words of Benjamin Graham, the father of value investing and mentor of legendary value investor Warren Buffett. Our collection of value investing strategy guides will explain how you can begin your own value investing program by focusing on fundamentals such as assets, liabilities, cash flow, and return on equity.
The developments on the income statement and balance sheet of Union Pacific between 2005 and 2013 are an excellent example of why it is important for you to analyze data yourself, and come to conclusions based on reasonable, rational, intelligently organized facts. The willingness to take action when others do not agree with you, and to have your action backed up by solid evidence, can make the difference between being comfortable and ending up rich. Two of the world’s wealthiest titans demonstrated this truth, not only when buying shares of Union Pacific, but other railroads, as well.
After writing about the 20 year performance of Colgate-Palmolive stock, my Aunt Donna asked me about Dawn dish soap, which is owned by Procter & Gamble. I broke out the historical dividend charts and went to work to create a comparison of how an investor would have fared had they parked money in P&G twenty…
A Look At How the Father of Value Investing Calculated the Intrinsic Value of an Ordinary Share of Common Stock Benjamin Graham, the rich investor, professor, and mentor to Warren Buffett, once proposed a quick back-of-the-envelope intrinsic value formula for investors to determine if their stocks were at least somewhat rationally priced. He encouraged investors…
Using Wal-Mart Stores as an Example of Earnings Yields vs. Treasury Bond Yields I was up until 5 a.m. this morning reading through the past few years’ of Wal-Mart Stores, Inc. annual reports, filings with the SEC, analyst reports, transcripts, and other documents. It is about time to have the businesses make another contribution to…
I’m re-reading “Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger” by Janet Lowe and came across a passage that illustrates exactly the sort of thing I’m talking about when I harp on acquiring assets that constantly churn out piles of cash for you spend, redeploy into new investments, give to charity, or…
I love Apple’s products and what Apple has accomplished over the past few years. However, it is amazing to see how little even journalists understand the way companies or valued or how to properly compare the total return generated by one business over a given period of time to another business.
A week or two ago, I wrote an article called Understanding Stock Repurchase Plans for About.com, a division of The New York Times, which discussed Sonic Restaurant and the massive stock buy back program that had taken place over the past few years. In it, I walked the readers through a lot of the math and explained that I had purchased a couple hundred shares to watch and monitor the stock through one of my companies, Mount Olympus Awards, LLC. (I’ve since increased it to about 500 shares to continue watching and waiting to see how events unfold).
John Templeton was a billionaire mutual fund pioneer that specialized in using a value investing strategy to buy stocks around the world. By practicing a disciplined version of Benjamin Graham’s teaching on a global scale, Templeton amassed an astounding record that made shareholders of his fund wealthy and earned him hundreds of millions of dollars in well-deserved fees. Toward the end of his life, John Templeton ran his international investments from his mansion on Lyford Clay in the Bahamas.
One of the least discussed secrets of great practitioners of the value investing strategy is the use of cash, cash equivalents, and bonds to augment returns. From Benjamin Graham and Warren Buffett to Wallace Weitz and Marty Whitman, intelligent use of excess funds has as much to do with growing your capital over the long run as does selecting individual common stocks. We’re going to look at some of the techniques that have been used by value investors to manage their reserves, and the role played in the overall portfolio.
The focus value investing strategy is different from traditional, Benjamin Graham value investing strategy because it is based upon the idea of putting money into more of an investor’s “best ideas”, as Warren Buffett put it. Some value investors despise focused investing, while others swear by it. I’m always very hesitant to talk about this particular strategy on Investing for Beginners where I publish my investing articles for total newbies, mostly because some lazy person may not study far enough and realize that focused value investing is only possible when someone has diversified income sources. Done wrong, it can be financially devastating.
