What is Value Investing?
- Outperforms when the cycle is near the bottom because earnings cannot go much lower and stocks are likely to be undervalued because of over pessimistic earnings outlook
- Value investors make money every year and protects you on the downside
- Investors are looking for companies that are trade at less than their real value will be recognized by the other market players and reflected in higher prices.
- Investors need to examine company fundamental business prospects. You want a company where something is going to change, either externally (Industry change) or internally (Management)
- Sell usually happens when wall street upgrades the recommendation
- Prefer cash flow to earnings as measure of the strength of the company’s businesses
- Top flight businesses with long term earning power at a low price holds them till they appreciate.
- Straight forward business. They have the staying power and make products people want badly or feel they need. Financial criteria free cash flow, high return on equity and shareholder-friendly management
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