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Strategies & Market Trends : Value Investing
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From: IndependentValue7/12/2015 4:11:28 PM
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Open question to the board: what are peoples views on investing in cheap (value) stocks that may have many of the attributes that we all seek (good underlying business, prospects, management, track-record, cash-flow etc.) but which have low or modest returns on capital (e.g. sub-15% ROIC or even ROE)?

I am trying to reconcile the Buffett/Munger brand of value investing (focus on quality) with the more general practice of value investing, involving purchase of cheap stocks (low PE/PB/FCF) but which doesn't always place a focus on quality and compounding value via returns on capital.

I often find really interesting stocks, with low EV/FCF, good prospects etc. but then when I get to ROIC I see 11% or maybe 13% and can't help but feel suddenly look-warm at best on it as an investment opportunity - would be great to get others views on how they view returns on capital in their value framework.

Thanks in advance

IV.
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