Accumulating large amounts of wealth via investing takes a combination of strong returns and investing over a long period of time. Practically all articles related to investing (including those on this site) are focused on getting those returns; this one post, however, is dedicated to prolonging the number of years in which you will be investing.
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Value investors may want to have a look at G. Willi-Food (WILC) , a Nasdaq-listed Israeli distributor of specialty foods. The company is profitable, and yet it trades for about its cash balance, despite the absence of debt!
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I recently read Peter Bevelin's book Seeking Wisdom: From Darwin to Munger.
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We've seen that the PE10 can be used to loosely forecast long-term (e.g. 10 years) market returns in the US. But what about internationally? It turns out that this intuitive (to value investors, at least) concept does indeed extend out to international markets. Greenbackd highlights two studies that demonstrate this empirically.
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Companies are susceptible to losing their customers as a result of disruptive technologies. In The Innovator's Dilemma, Christensen demonstrates that companies are overtaken despite doing everything right - listening to customers and investing in the highest-return projects. By studying the disruptive process, Christensen shows how companies can defend themselves from disruptive technologies. Read more...
Companies are susceptible to losing their customers as a result of disruptive technologies. In The Innovator's Dilemma, Christensen demonstrates that companies are overtaken despite doing everything right - listening to customers and investing in the highest-return projects. By studying the disruptive process, Christensen shows how companies can defend themselves from disruptive technologies. Read more...
Value investors who are also history buffs may love Against the Gods: The Remarkable Story of Risk.
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I've talked about the opportunities that falling knives (aka large stock price drops) can create for value investors here. But I had no empirical basis for such statements. I was only making the case that buying a company at a dramatically lower price makes for smarter investing than paying the previous price; in other words, I was ignoring the price action itself. But it turns out the price action appears to be beneficial when it comes to falling knives!
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To gauge how expensive the general market is, investors will often look at the market's overall P/E. Unfortunately for investors, however, the market's earnings can fluctuate dramatically. For example, S&P 500 earnings were 66 in 2007, 15 in 2008, 51 in 2009, and 77 in 2010. With earnings in a constant state of flux, how can the investor rely on the market's P/E when it is subject to such dramatic change?
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As value investors, we are trained to look at the "Goodwill" and "Intangibles" lines on a company's balance sheet with great skepticism. After all, these supposed company assets are not hard assets like equipment or land or receivables and therefore can't be used to generate cash flows and furthermore they have no salvage value. But the future cash flows of companies with large intangible assets listed on their balance sheets can often be underestimated unless those intangibles are taken into account.
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For years, value investor Frank Martin's returns suffered relative to the market as the tech bubble grew to epic proportions. Value stocks were getting clobbered. In 1998, the S&P 500 returned almost 30%; in the same year, Martin Capital Management returned minus 7.4%! His book, Speculative Contagion, reproduces his correspondence with clients during this difficult period.
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Companies are susceptible to losing their customers as a result of disruptive technologies. In The Innovator's Dilemma, Christensen demonstrates that companies are overtaken despite doing everything right - listening to customers and investing in the highest-return projects. By studying the disruptive process, Christensen shows how companies can defend themselves from disruptive technologies. Read more...
Companies are susceptible to losing their customers as a result of disruptive technologies. In The Innovator's Dilemma, Christensen demonstrates that companies are overtaken despite doing everything right - listening to customers and investing in the highest-return projects. By studying the disruptive process, Christensen shows how companies can defend themselves from disruptive technologies. Read more...
Shares of office supplies distributor Staples (SPLS) fell almost 20% at one point Wednesday following the release of its second quarter results. But is the company worth so much less today than it was just two days ago? The company reduced its 2012 earnings growth estimate from high single-digits to low single-digits. Considering the company's competitive position, it now trades at a very attractive P/E of 8, which may provide for an excellent entry point for long-term investors.Read more...
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There appears to be a prevailing market belief that commodity prices can only rise in the long-term, despite short-term fluctuations. Inelastic demand from developed countries and unremitting demand growth from emerging markets are the most commonly cited reasons for this. As a result, investors are putting companies in this space on a pedestal, taking recent earnings growth of such firms for granted. Value investors must be careful not to get caught up in this game of rising commodity prices leading to rising earnings expectations; it can result in portfolio disaster.
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It's unusual to see a large company where a net cash position makes up the bulk of its market cap, but such is the case with Tellabs (TLAB), seller of switches and other networking equipment to telecom providers. Tellabs trades for just $1.2 billion, despite a net cash position of more than $900 million.
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In this age of information, a great number of people spend most of their waking hours reading. Value investors are no exception; we need to read articles, books, 10-Ks and all sorts of other filings. The benefits to reading faster, therefore, are massive.
As I recently learned, speed reading is no myth; it can be done! In the last two months, I've tripled my reading speed. While comprehension is a difficult thing to measure, I have tried to measure it anyway, and I believe my comprehension has not suffered as a result of my faster reading. I'm convinced that with a little practice, you can improve your reading speed as well.
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Just 9 months ago, Janus was discussed on this site as a potential value investment. Last week, investors were offered the opportunity to sell the company following a gain of 47% from its November 2011 price. As such, Janus becomes the latest company to move from the Stock Ideas page to the Value In Action page.
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Companies are susceptible to losing their customers as a result of disruptive technologies. In The Innovator's Dilemma, Christensen demonstrates that companies are overtaken despite doing everything right - listening to customers and investing in the highest-return projects. By studying the disruptive process, Christensen shows how companies can defend themselves from disruptive technologies. Read more...
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Electronics retailers are at a crossroads. The flagship products they made so much money on in the last decade, namely flat-screen tvs, are no longer as lucrative as they once were. Consider how differently these companies are choosing to react to the new environments they are facing.
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The title does not refer to Twitter as a value investment, but rather as a tool for value discussion! It has been two years now since I joined Twitter, and in that relatively short amount of time it has become an important part of my investing life! Value investors have a lot to gain from Twitter, which is why I recommend that all readers join Twitter if they haven't already.
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As earnings season continues, investors are keeping a watchful eye on their favourite companies' quarterly reports. Stocks become highly volatile during this period, moving several percentage points up or down based on a company's reported earnings per share (EPS) numbers. But too many investors blindly incorporate earnings per share (EPS) as a primary component of their valuations. EPS gets multiplied by a P/E multiple, or it is used as a base for growth rate multipliers to be discounted back to present value. However, for several reasons, investors must avoid using such short cuts in company valuations.
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Value investors can spend a lot of time evaluating the quality of a company's management. We look at management's track record, and attempt to gauge the level of management's candor in providing information to shareholders.
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As value investors, we're conditioned to immediately capitalize operating leases as debt. While that's the simplest way of handling them in order to derive a credible valuation, it leaves a lot to be desired. For one thing, the maturity of the leases can be a huge determinant of how large a "debt load" the leases actually represent. For example, compare the lease obligations of these two electronics retailers:
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Lending credence to those who believe history constantly rhymes, financial bubbles pop-up again and again. Sometimes the asset class that has been gripped by speculative mania is a familiar one, and sometimes it is not. From tulip bulbs to real estate, however, every bubble eventually gets popped. To keep the mania going, a growing amount of money is needed to support it, and eventually there isn't enough.
In the non-financial world, there appear to be bubbles as well. But the currency is not money, but rather opinions and actions. As there are no shortage of those, such bubbles can persist for thousands of years. But what causes such bubbles? Enter Malcolm Gladwell's Tipping Point, which I recently had the opportunity to read.
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Stocks trading at discounts to their net current assets often look cheap. But investors fear what the the company is going to do with its capital. Companies often trade at such large discounts when they have made poor acquisitions or can't control expenses relative to revenues. But what happens if a company trading at such a discount buys back its shares at the discounted price? Such a company offers the potential for great returns for shareholders.
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MIND CTI (MNDO) is a volatile stock, even though it's a profitable company where most of its market cap is made up of cash! The company currently trades for just $32 million despite a net cash position of $17 million and earnings above $4 million in each of the last three years.
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Conventional wisdom in the stock market offers that a stock will go up when a dividend is announced, and will go down if a dividend is cancelled. Bucking that trend last week was Telefonica (TEF), which is up some 10% since it announced the elimination of its dividend. I'd have to agree with the market on this one - the absence of a dividend makes this a more appealing stock for investors, for several reasons.Read more...
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