AAAMP Value Blog
A Value Investing Blog
Slow and Steady Wins the Race
Operating Earnings Yield is a profitability and valuation ratio; one of my favorite for company stock analysis. This metric provides valuable information about a company’s profitability and how much you are paying for those profits via the stock price.
Treasury Inflation Protected Securities (TIPS) provide benefits that are unavailable with any other investment. We’re going to explore how TIPS work, their benefits, and when it makes sense to buy and hold them in a portfolio.
Net Financial Debt and its ratios are an effective and efficient metric when analyzing companies. These metrics are more important than ever because of the corporate trend to leave cash overseas and borrow domestically.
The balance sheet is the foundation from which a company operates its business. A company’s liquidity and the leverage used play a big role in the success or failure of a business. Net Financial Debt is a critical metric for investment analysis.
Low Cost No Commission ETF Portfolios are the best approach for investors to get started with small investment amounts. ETFs are the perfect investment vehicle for beginning investors, smaller portfolios, and larger portfolios that want significant diversification in a particular geographical area, sector, or industry.
Asset Allocation is where investors make their biggest investing mistakes. Portfolio volatility is lowered by combining low or negatively correlated assets.
The purpose of estimating intrinsic value is to take advantage of mis-priced assets. Don’t get discouraged because you feel it’s difficult to determine the intrinsic value of a stock. It is not a science! It is the variables that make up your estimated intrinsic value that are more important than an exact intrinsic value number.
Microsoft history teaches us an important price to value lesson. Real example of two investors who buy the same stock with very different returns.
We answer the question: What is Alpha and Beta?. Then we look at how a value oriented investor can approach these two investment concepts and become a better investor.
Portfolio Diversification is a foundational concept in investing. It can be a rather basic and easy to understand concept. However, in its implementation, many investors make catastrophic mistakes with too much concentration and others settle for average performance because of over diversification.
Portfolio diversification is a balance between concentration and over diversification to optimize risk and potential return.
Just as grading on a curve in school was inaccurate, analyzing stocks on a curve is inaccurate. Try to recognize when others (media, stockbrokers, etc.) are trying to tempt you to buy stocks based on this analysis. It’s a false choice you don’t have to make.
The Gross Profitability Ratio is gaining credibility in value investing circles as a qualitative metric which provides valuable, if not predictive, analysis. Gross Profitability is my favorite metric to apply to stocks I have already determined to be cheap.
As value investors, one of our most important rules is to avoid incurring large losses. There are two easy ways to subject yourself to possible large losses; buy stocks for more than they’re worth, and buy stocks of companies that go bankrupt. The Altman Z-Score is a formula of 5 basic financial ratios to help determine the financial health of a company. In particular, it is a probabilistic model to screen for bankruptcy risk of a company.