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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Graham Osborn who wrote (61581)	12/27/2018 11:24:50 PM
From: Elroy	Respond to of 78748

I think people are far too imprecise about what it means to be a "value investor." To me, a good definition is "someone who buys an asset with the view that the retained or distributed cash flows OVER HIS HOLDING PERIOD will exceed the principal invested, plus inflation and an appropriate risk premium." I would say a value stock is a stock with a price to book below the average. Book value can be tangible book, or accounting book, or whatever. And the average can be sector average, S&P 500 average, or whatever. But the idea that a stock is a value stock (as opposed to a growth stock) is that it's valuation (generally, price to book value) is low. Conversely growth stock would be stock which have revenues, EPS, cash flow and/or other nice things which grow more rapidly than the average. For a growth stock the key thing is the ongoing fundamental business trends (it grows quickly), whereas for a value stock the key thing is a single point in time valuation metric (it's cheap, right now).

To: Graham Osborn who wrote (61581)	12/28/2018 2:15:48 AM
From: Paul Senior	1 Recommendation Recommended By E_K_S Read Replies (1) \| Respond to of 78748

Not sure what to make of your requirements: "someone who buys an asset with the view that the retained or distributed cash flows OVER HIS HOLDING PERIOD will exceed the principal invested, plus inflation and an appropriate risk premium." So if there were a company that has $1 share in retained or distributed cash flows and over the ten-year holding period has an inflation and risk premium that total 7% compounded, then after 10 years you have received $11 of cash flow (my calculator apparently starts at $1 in year 0) and $5 of compound interest. That total is $16. (I'm not sure what is compounding here - a dollar each year, or the !.07 etc.) Anyway it seems then if you wanted a stock that would meet your requirement, you'd be willing to buy a stock selling for $16 or less x cash flow now with expectation that retained or distributed cash flows in ten years get you $16. That's 16x retained or distributed cash flow. That seem too loose a criterion in this market -- so many meet this requirement (not growth, FANG though). What are you using for inflation and risk premium? Otoh, if somebody could actually be assured that retained or distributed cash flow could increase over the ten years, then maybe the stock is a buy-and-hold. Do you have any experience in holding on to a stock for ten years? Harder than it seems imo.

To: Graham Osborn who wrote (61581)	12/31/2018 7:42:15 PM
From: Spekulatius	1 Recommendation Recommended By Jurgis Bekepuris Read Replies (1) \| Respond to of 78748

To me, a good definition is "someone who buys an asset with the view that the retained or distributed cash flows OVER HIS HOLDING PERIOD will exceed the principal invested, plus inflation and an appropriate risk premium." This makes no sense to me. A stock doesn‘t care about who owns it. Do you believe the value of a certain asset depends on who owns it ? I don’t unless there is a control angle. I do think that a stock can be an appropriate choice for one investor and not for an other, but that’s a different thing. In most cases, the residual value after the discounted cash flow period is over, decides if an investment is successful or not. Qualitatively, it is important to judge if a business is going to grow in value of depreciate.