Ten Foolproof Factors For Successful Value Investing
By Randall JP Stewart | Submitted On September 17, 2011
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Expert Author Randall JP Stewart
1. Process:
Commit to an investment philosophy that emphasizes capital preservation, patience, discipline and a rational decision-making process. The best value investors follow a defined process of analysis of value rather than focusing on outcomes. Since business valuation …show more content…
Discipline:
Learn to be rational, not emotional, with your investment decisions. Don 't allow yourself to get caught up in the media hype. Be able to assess the main drivers of a business and have the discipline to ignore the remaining noise. Only let the media inform you, not instruct your investment decision. Let journalists be journalists, not stock picks. Discipline investors don 't chase after the current investment fad of the day or what may be popular on Wall Street. Disciplined investors don 't abandon an investment at the first sign of trouble.
4. Profitability:
Focus on investing in businesses that have demonstrated over time a consistent ability to increase book value and return on capital. Ideally, the growth rate of book value per share (BVPS) and return on investment capital (ROIC) should be greater than 10% per year over 7-year, 5-year, 3-year and 1-year periods of time. Consistency is the key.
5. Debt:
Assess the level of long-term debt. A healthy company should be able to pay off any long-term debt within 3 years from current net income or free cash flow projections. The company 's balance sheet will tell you what the company has in assets versus its liabilities or debt obligations.
6. Margin of …show more content…
Patience is key to your success. Stock prices aren 't always rational. We don 't know when Mr. Market 's price for a stock will be in line with the true intrinsic value of the business. In the short run the market prices stocks based on investor sentiment. In the long run the market prices stocks according to the fair market value based on fundamentals.
These 10 key factors to successful value investing can be summarized into five essential steps, as follows:
- Commit to and follow a sound investment philosophy based on patience, discipline and risk aversion.
- Develop a good search strategy for potential businesses.
- Effectively value each business, knowing that it is an estimate at best.
- Have the discipline and patience to say no to opportunities until the right one comes along.
- Be willing to commit a significant amount of capital at the point of greatest pessimism in the stock or the market.
To your ongoing success as a value investor.
How could you better manage your stock portfolio with greater confidence and ease?
Learn some additional strategies and tips that will enable you to become a more consistent and successful investor.
Visit Stock Investing Simplified
By Randall JP Stewart | Submitted On September 17, 2011
Recommend Article Article Comments Print Article Share this article on Facebook Share this article on Twitter Share this article on Google+ Share this article on Linkedin Share this article on StumbleUpon Share this article on Delicious Share this article on Digg Share this article on Reddit Share this article on Pinterest
Expert Author Randall JP Stewart
1. Process:
Commit to an investment philosophy that emphasizes capital preservation, patience, discipline and a rational decision-making process. The best value investors follow a defined process of analysis of value rather than focusing on outcomes. Since business valuation …show more content…
Discipline:
Learn to be rational, not emotional, with your investment decisions. Don 't allow yourself to get caught up in the media hype. Be able to assess the main drivers of a business and have the discipline to ignore the remaining noise. Only let the media inform you, not instruct your investment decision. Let journalists be journalists, not stock picks. Discipline investors don 't chase after the current investment fad of the day or what may be popular on Wall Street. Disciplined investors don 't abandon an investment at the first sign of trouble.
4. Profitability:
Focus on investing in businesses that have demonstrated over time a consistent ability to increase book value and return on capital. Ideally, the growth rate of book value per share (BVPS) and return on investment capital (ROIC) should be greater than 10% per year over 7-year, 5-year, 3-year and 1-year periods of time. Consistency is the key.
5. Debt:
Assess the level of long-term debt. A healthy company should be able to pay off any long-term debt within 3 years from current net income or free cash flow projections. The company 's balance sheet will tell you what the company has in assets versus its liabilities or debt obligations.
6. Margin of …show more content…
Patience is key to your success. Stock prices aren 't always rational. We don 't know when Mr. Market 's price for a stock will be in line with the true intrinsic value of the business. In the short run the market prices stocks based on investor sentiment. In the long run the market prices stocks according to the fair market value based on fundamentals.
These 10 key factors to successful value investing can be summarized into five essential steps, as follows:
- Commit to and follow a sound investment philosophy based on patience, discipline and risk aversion.
- Develop a good search strategy for potential businesses.
- Effectively value each business, knowing that it is an estimate at best.
- Have the discipline and patience to say no to opportunities until the right one comes along.
- Be willing to commit a significant amount of capital at the point of greatest pessimism in the stock or the market.
To your ongoing success as a value investor.
How could you better manage your stock portfolio with greater confidence and ease?
Learn some additional strategies and tips that will enable you to become a more consistent and successful investor.
Visit Stock Investing Simplified