AAAMP Value Blog
A Value Investing Blog
Slow and Steady Wins the Race
Buy and Hold is considered by many to be the holy grail of investing. Its current popularity has become a cult-like strategy that draws criticism to its critics and disdain towards those who dare speak out against the beloved investing strategy.
So buy and hold works….until it doesn’t. People will quote all kinds of statistics “proving” that buy and hold works. Its the trend of our day. This is nothing new. Bull markets make buy and hold look good. Bear markets make buy and hold look bad.
The Gross Profitability Ratio is gaining credibility in value investing circles because it provides valuable and predictive qualitative analysis when combined with valuation metrics. Some analysts argue it is the single best qualitative metric with which to compare multiple stocks (particularly within the same industry) that have already been determined to be bargains.
The quotes from the Book of Value by Anurag Sharma are investment gems that include deep “second-level thinking”.
Careful and rigorous analysis helps investors resist the temptation to do foolish things. Good investors are capitalists — they invest on the basis of sound data and analysis, with an eye for what could go wrong.
Dividend Coverage Ratios allow analysts to evaluate the safety of a company’s dividend. Many investors concentrate on the dividend yield but don’t give sufficient attention to the safety of that dividend.
In the long run companies must create enough cash flow to pay expenses, invest in the future (capital expenditures), service their debt (if any), and return money to shareholders.
Dividend yield is the annual dividend per share of a company compared to the price of the stock expressed as percentage. In other words it tells you the percentage dividend return the stock owner receives on the current price of a stock.
The dividend yield has historically provided approximately one-half of long term total stock market returns to investors. It’s a little less than one-half for those who take their dividend and little over one-half for those who reinvest their dividends.
Dividend Payout Ratios provide us valuable information on how much money a company is returning to shareholders and their ability to pay and increase the dividend. One of these ratios is far superior to the other.
The Dividend Payout Ratio and the Cash Dividend Payout Ratio are compared to find out which is better at providing pertinent information to differentiate between various dividend paying companies.
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.
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.