# Value Investing - Courses in Dublin? and Advice please



## ringledman (4 Nov 2008)

Hi, 

Any Value Investors out there? Anyone live by the rules of Graham and Buffet?

I really believe that this is the best approach to investing in the markets particularly the way the economies are going.

Can anyone provide any advise on the subject? Any courses on investing and in particular value investing run in Dublin?

Cheers.


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## Dave Vanian (5 Nov 2008)

Invest Like The Best and Solas Financial run courses on stock-market investment in general, although I don't think either specifically concentrates on value investing.  But they might be of some interest to you.  I'm not aware of any courses that solely teach the value approach.


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## Marc (5 Nov 2008)

Very Interesting question and well timed!!

We are actually considering running a seminar on this very subject in Dublin and would be interested in assessing the demand out there.

If you are interested in learing more about value investing please private message me with your personal e mail address and if there is sufficient demand, we will run a seminar for askaboutmoney members.

Evidence from practising investors and academics alike points to an undeniable conclusion: returns are related to risk. 

Gain is rarely accomplished without taking a chance, but not all risk-taking is rewarded. Financial economics over the last fifty years has brought us to a powerful understanding of the risks that are generally rewarded and the risks that are not.


*Market*         Shares have higher expected returns than fixed interest.                   *
Size*         Small company shares have higher expected returns than large company shares. 
*Price*         Lower-priced "value" shares have higher expected returns than higher-priced "growth" shares.                      


Everything we have learned about expected returns in the equity markets can be summarised in this way:

Firstly,stocks are riskier than bonds and have greater expected long-term returns. 

Relative performance among stocks is largely driven by the two factors:

 small cap vs large cap and value vs growth. 


Many economists believe small cap and value stocks outperform over the long term because the market rationally discounts their prices to reflect underlying risk. The lower prices give investors greater upside as compensation for bearing this risk.

[broken link removed]


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## lemur (5 Nov 2008)

Marc said:


> Very Interesting question and well timed!!
> 
> We are actually considering running a seminar on this very subject in Dublin and would be interested in assessing the demand out there.
> 
> ...



Marc, 

Growth stocks are the way to make money in the equities market. With all due respect the value investing argument is the way brokers off load stocks that nobody wants to the gullible public. O'Neill's books and many other studies have illustrated this. 

But if you are running a course and want me to come along a give a talk (no charge) on how the pro's trade the markets I would be happy to do so.


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## colm5 (5 Nov 2008)

ringledman said:


> Hi,
> 
> Any Value Investors out there? Anyone live by the rules of Graham and Buffet?
> 
> ...


 
Don't waste your money on these 'value investing' courses. Buy a book, or Berkshire Hathway B stock. 
Do you think the people giving these courses would need to  be giving them if they really knew how to invest in the market? Don't think so.


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## croker (5 Nov 2008)

Don't forget to Google "value trap"


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## lemur (5 Nov 2008)

croker said:


> Don't forget to Google "value trap"



Value = nobody wants the stock. 

A broker might encourage you to buy it to off load the stock if he owns it or earn some commission.


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## Marc (5 Nov 2008)

lemur said:


> Marc,
> 
> Growth stocks are the way to make money in the equities market. With all due respect the value investing argument is the way brokers off load stocks that nobody wants to the gullible public. O'Neill's books and many other studies have illustrated this.
> 
> But if you are running a course and want me to come along a give a talk (no charge) on how the pro's trade the markets I would be happy to do so.



Lemur,

I would gladly accept your offer.

We seem to represent alternate sides of this debate so we could have a lively presentation around passive investing vs trading and speculating or Growth vs Value investing which would make it all the more interesting.

Maybe we should ask Eddie Hobbs or George Lee to moderate?


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## lemur (5 Nov 2008)

Marc said:


> Lemur,
> 
> I would gladly accept your offer.
> 
> ...



Ok. This is an old debate but it would be fun to clear up people's mis-conceptions about trading. The reality is investing is just trading with a longer timeframe. Traders sometimes joke an investment is a trade that is under water (which reminds me of Sean Quinn's recent foray into CFD's which has now become an investment).

However, if you are running a trading course then debate is not a suitable format as that would confuse people.


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## ringledman (6 Nov 2008)

lemur said:


> Marc,
> 
> Growth stocks are the way to make money in the equities market. With all due respect the value investing argument is the way brokers off load stocks that nobody wants to the gullible public. O'Neill's books and many other studies have illustrated this.
> 
> But if you are running a course and want me to come along a give a talk (no charge) on how the pro's trade the markets I would be happy to do so.


 
Lemur, 

Share your thoughts with us then regarding the greatness of growth shares. 

Most are too highly priced to be investments or represent 'new technology' that never makes investors long term money...railways, air companies, tech stocks in the 90's and probably alternative energy stocks now.


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## lemur (6 Nov 2008)

ringledman said:


> Lemur,
> 
> Share your thoughts with us then regarding the greatness of growth shares.
> 
> Most are too highly priced to be investments or represent 'new technology' that never makes investors long term money...railways, air companies, tech stocks in the 90's and probably alternative energy stocks now.



Ringledman - this is an old argument with lots of studies on it. Your second statement is to general to be meaningful. 

Pick up a copy of O'Neill's book on CANSILM investing to grasp some of the concepts and take it from there. 

From a value point of view the only stocks I would consider are high div paying ones such as the Canadian energy trusts.


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## ringledman (6 Nov 2008)

lemur said:


> Ringledman - this is an old argument with lots of studies on it. Your second statement is to general to be meaningful.
> 
> Pick up a copy of O'Neill's book on CANSILM investing to grasp some of the concepts and take it from there.
> 
> From a value point of view the only stocks I would consider are high div paying ones such as the Canadian energy trusts.


 
Hardly a convincing argument. Growth stocks will get hit hard in this downturn. Lack of investors and falling earnings across the board. 

Growth stocks are great in the good times, terrible in the bad. 

Value is the only way forward to minimise the downside in the current climate which is the number 1 rule. 

Growth and value returns oscilate depending upon the economy. Value is the way forward now.


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## smiley (6 Nov 2008)

ringledman....i am a value investor and contrarian at heart. I am an avid reader and follower of buffett, munger, dreman, bolton and a number of other very well known value investors.

value investors represent about 5% of the investing population, which suits me just fine.

all i can say to you is read, read, read and continue reading. This is what buffett and munger do the whole time. The internet is an immense wealth of information- search search search.

Read  all the berkshire hathaway annual reports and read and study the value investors bible- the intelligent investor by ben graham.

read as many value investing related books you can get your hands on and you will do very well.


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## lemur (6 Nov 2008)

ringledman said:


> Hardly a convincing argument. Growth stocks will get hit hard in this downturn. Lack of investors and falling earnings across the board.
> 
> Growth stocks are great in the good times, terrible in the bad.
> 
> ...



The idea is you ride growth stocks up and take profits. You don't ride them down.


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## ringledman (6 Nov 2008)

lemur said:


> The idea is you ride growth stocks up and take profits. You don't ride them down.


 
So we agree, growth stocks will be a terrible investment over the next 5 years of economic woes.


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## lemur (6 Nov 2008)

ringledman said:


> So we agree, growth stocks will be a terrible investment over the next 5 years of economic woes.



5 years is too long a timeframe for me. Who knows where the market will be in 5 years. Admittedly, its not looking good


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## ringledman (6 Nov 2008)

lemur said:


> 5 years is too long a timeframe for me. Who knows where the market will be in 5 years. Admittedly, its not looking good


 
So your a trader then not an investor. 

Guess that explains our different approaches. 

Value investing favours the long term investor. I want to buy a share and forget about it for the next 30 years, return to it and see the huge gain.


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## ringledman (6 Nov 2008)

smiley said:


> ringledman....i am a value investor and contrarian at heart. I am an avid reader and follower of buffett, munger, dreman, bolton and a number of other very well known value investors.
> 
> value investors represent about 5% of the investing population, which suits me just fine.
> 
> ...


 
Thanks Smiley i couldn't agree more. The intelligent investor blows you away with its rational, contrarian approach. To follow the crowd screws you in investing, I have been there.

Value investing is in my opinion  is the route for the long term investor. Growth fads come and go. Value companies that produce the basic boring products and services at the same time producing good earnings beat the 20-35 P/E growth stocks every time. Buy them and forget about them for the long term. 

Whats your thoughts on the 'cigar butt', 'worth more dead' approach of Graham? What's the situation for the investor if they do go bust?


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## lemur (7 Nov 2008)

ringledman said:


> Thanks Smiley i couldn't agree more. The intelligent investor blows you away with its rational, contrarian approach. To follow the crowd screws you in investing, I have been there.
> 
> Value investing is in my opinion  is the route for the long term investor. Growth fads come and go. Value companies that produce the basic boring products and services at the same time producing good earnings beat the 20-35 P/E growth stocks every time. Buy them and forget about them for the long term.
> 
> Whats your thoughts on the 'cigar butt', 'worth more dead' approach of Graham? What's the situation for the investor if they do go bust?



'Value companies that produce the basic boring products and services at the same time producing good earnings beat the 20-35 P/E growth stocks every time.' - A clueless comment I am afraid. Value stocks are cheap for a reason. You need to do some research in this area.


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## smiley (7 Nov 2008)

hi ringledman...

cigar butts and grahams approach works. The only problem over the last few decades is there hasnt been so many companies below tangible net asset value to buy. Graham always bought at least 1/3 below the tangible nav.

the trick was he bought enough of these stocks so was very well diversified..so even if a few went bust (which is going to happen) he still beat the market by miles.
Buffet and co of course now adapted grahams approach and buy below 'intrinsic value', and this is the approach i mostly use. Of course in the last year mr market has gotten very ill and is now giving companies away, in some cases at huge discounts to tangible nav.
That wont last too long though, once his medication kicks in. Its bargain time galore!

I have read a lot of mostly value investing related books over the last 2 years. I have learnt a heck of a lot. I have also made mistakes which i plan not to make again. Most of these were companies i bought before i read a lot of the value investing books.

The pyschology of the whole market fascinates me. The 'herd instinct' amongst the average investing public (including most fund managers) is unbelievable. I just do the total opposite. Ive trained myself to do this. Id also say the contrarian approach is also part of the way we are wired. 

However much i cannot stand the media circus at the moment, they are doing long term value investors a great service. They are frightening the life out of people, causing them to sell their shares and so on.....bargain time!


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## lemur (7 Nov 2008)

smiley said:


> hi ringledman...
> 
> cigar butts and grahams approach works. The only problem over the last few decades is there hasnt been so many companies below tangible net asset value to buy. Graham always bought at least 1/3 below the tangible nav.
> 
> ...



'Graham always bought at least 1/3 below the tangible nav'. - Such nonsense. Name companies that are selling for this which would be tantmount to free money.

Its amazing the absurd things people believe.


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## smiley (7 Nov 2008)

lemur..lol

that just shows how little you know.

Is there an 'ignore' button on askaboutmoney.com??


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## lemur (7 Nov 2008)

smiley said:


> lemur..lol
> 
> that just shows how little you know.
> 
> Is there an 'ignore' button on askaboutmoney.com??



LOL. Oh great. So name a company somebody can buy for say $66.6m and then sell the assets for $100m. Free money. If you believe this, you clearly know nothing about the market and its pricing mechanisms.


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## ringledman (8 Nov 2008)

lemur said:


> LOL. Oh great. So name a company somebody can buy for say $66.6m and then sell the assets for $100m. Free money. If you believe this, you clearly know nothing about the market and its pricing mechanisms.


 
Lemur please let us know when you will be giving your talk about how the pros trade the market I want to know what stocks to avoid that people like you are promoting.

You sell yourself as some big hitter in the financial industry but you have yet to produce one convincing argument to back your position up unlike smiley.


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## ringledman (8 Nov 2008)

lemur said:


> 'Graham always bought at least 1/3 below the tangible nav'. - Such nonsense. Name companies that are selling for this which would be tantmount to free money.
> 
> Its amazing the absurd things people believe.


 
Yes he believes in the efficient market theory. Shares always represent their true market value with all known information priced in. 

b*******s. 

Lemur please present your investment strategy you obviously know so much more than us mere mortals. Eagerly anticipating your investment lecture.


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## lemur (8 Nov 2008)

ringledman said:


> Lemur please let us know when you will be giving your talk about how the pros trade the market I want to know what stocks to avoid that people like you are promoting.
> 
> You sell yourself as some big hitter in the financial industry but you have yet to produce one convincing argument to back your position up unlike smiley.



? I don't promote any stocks?

big hitter? I have made no claims other than I am a trader. 

Unlike smiley - what convincing arguments has he produced other than he does not even understand basic market pricing mechanisms on the basis of what was written above.


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## tyoung (8 Nov 2008)

lemur said:


> 'Graham always bought at least 1/3 below the tangible nav'. - Such nonsense. Name companies that are selling for this which would be tantmount to free money.
> 
> Its amazing the absurd things people believe.


*11 Stocks Selling Below Cash*



http://seekingalpha.com/article/103...-cash?source=front_page_most_popular_articles

AIB BOI mentioned!


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## lemur (8 Nov 2008)

tyoung said:


> *11 Stocks Selling Below Cash*
> 
> 
> 
> ...




LOL. What are the debt, the liabilities and other obligations. If the Irish banks have so much cash why are they looking for a govt bailout.


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## smiley (8 Nov 2008)

tyoung..well done.

those companies you mentioned and lots of others crossed my mind.

the great thing about value investing is most speculators and investors wont believe you, or have a clue what you are talking about....which, is brilliant for us.

buying dollars for 50 cent or less is what value investing is all about. You either get this or you dont. Christoper Browne (tweedy browne) talks about this in his book- 'the little book of value investing'. 

ringledman....emt..lol..its a total joke. Markets are efficient in the long term, but short term a total roller coaster ride!

I just see the stock market as a buying or selling mechanism for shares..thats all it is. Its got very little to do with company you own. Once you understand that, what happens in the stock market doesnt matter a flying monkeys. To be honest i have really only understood this in the last year or so. 

Every time the stock market plummets now, i get very excited. Mamma mia....they are giving away some of the best businesses in the world at ridiculously low prices. I never thought this opportunity would exist.

By the way as an exercise..go to yahoo.com/finance and graph for example the sp500 or the dow for the last 70-80 years............whats the general trend? answer=up. Can you spot the market crash of e.g 1987? or even sept 11th? or 2000-2001?..........you might just make out a blip...but thats about it.

you would really wonder what the fuss is all about!


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## lemur (9 Nov 2008)

smiley said:


> tyoung..well done.
> 
> those companies you mentioned and lots of others crossed my mind.
> 
> ...




'buying dollars for 50 cent or less is what value investing is all about.' - Totally daft comment. There is no free money like this available in the market. On this basis somebody could just buy the company and sell the assets for a 100% return. Anybody who believes this is possible deserves to lose their money.

Over the last ten years the S&P500 has returned 13.8% inc dividends, approx 1.7% per year. So the lay person is better sitting in cash in a bank account with no risk.


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## tyoung (9 Nov 2008)

Current Forbes article on Ben Graham and buying stocks for less than net current assets.
http://www.forbes.com/home/forbes/2008/1110/056.html
And yet another article.
http://biz.thestar.com.my/news/story.asp?file=/2008/10/8/business/2211821&sec=business


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## lemur (9 Nov 2008)

tyoung said:


> Current Forbes article on Ben Graham and buying stocks for less than net current assets.
> http://www.forbes.com/home/forbes/2008/1110/056.html
> And yet another article.
> http://biz.thestar.com.my/news/story.asp?file=/2008/10/8/business/2211821&sec=business



Use just a modicum of common sense here. If a company was selling for less than its NAV then speculators would quickly move in, buy the company and sell the assets for a nice return. 

Much of the book value quoted by companies is fiction. For that first article,  go down and  read the comment on Croc.  A deeper dig into the  numbers on that table will open a can of accounting worms in all of those cheap stock price companies. Healthy growing companies all have premiums built into their stock price.


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## smiley (9 Nov 2008)

lemur..i didnt mention book value...

you are talking nonsense and are showing your complete ignorance here.


in fact, get off this thread please. We are trying to have an educated debate here.

you are a messer...wind up merchant.


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## lemur (9 Nov 2008)

smiley said:


> lemur..i didnt mention book value...
> 
> you are talking nonsense and are showing your complete ignorance here.
> 
> ...



Obviously you don't even know what book value is...

My last post on this thread.


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## Dave Vanian (10 Nov 2008)

smiley said:


> lemur..i didnt mention book value...
> 
> you are talking nonsense and are showing your complete ignorance here.
> 
> ...


 
What right have you to tell another poster to "get off" a thread?

Why do you lower the tone by making personal insults?

I may not agree with lemur's points, but I believe s/he has a right to make them here without being insulted or attacked.  If you don't agree with another poster's opinion, why can't you produce verifiable facts to contradict it rather than attacking the poster?


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## zephyro (10 Nov 2008)

lemur said:


> A deeper dig into the numbers on that table will open a can of accounting worms in all of those cheap stock price companies. Healthy growing companies all have premiums built into their stock price.


 
And yet studies have repeatedly shown that buying stocks at very low P/Bs greatly outperforms.


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## croker (10 Nov 2008)

> And yet studies have repeatedly shown that buying stocks at very low P/Bs greatly outperforms.


Not saying I don't believe you but if you're going to say something like that you need to give examples of the studies and list the assumptions made in the studies because every study will make assumptions. I'm sure there are studies to show the opposite result too.


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## zephyro (11 Nov 2008)

croker said:


> Not saying I don't believe you but if you're going to say something like that you need to give examples of the studies and list the assumptions made in the studies because every study will make assumptions. I'm sure there are studies to show the opposite result too.


 
There are many more if the below doesn't suffice. No assumptions made. If you know of a single reputable study that finds that growth stocks outperform in statistically significant out of sample periods please post it as I don't know of any.

Basu, Sanjoy, "Investment Performance of Common Stocks in Relation to Their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis," _Journal of Finance_ 32 (1977): 663-682.

Basu, Sanjoy, "The Relationship between Earnings Yield, Market Value and Return for NYSE Common Stocks: Further Evidence," _Journal of Financial Economics_ 12 (1983): 129-156.

Jaffe, Jeffrey, Donald B. Keim, and Randolph Westerfield, "Earnings Yields, Market Values, and Stock Returns," _Journal of Finance_ 44 (1989): 135-148.

Rosenberg, Barr, Kenneth Reid, and Ronald Lanstein, "Persuasive Evidence of Market Inefficiency," _Journal of Portfolio Management_ 11 (1985): 9-17.

Chan, Louis K.C., Yasushi Hamao, and Josef Lakonishok, "Fundamentals and Stock Returns in Japan," _Journal of Finance_ 46 (1991): 1739-1789.

Fama, Eugene F., and Kenneth R. French, "The Cross-Section of Expected Stock Returns," _Journal of Finance_ 47 (1992): 427-465.

Davis, James L., "The Cross-Section of Realized Stock Returns: The Pre-COMPUSTAT Evidence," _Journal of Finance_ 49 (1994): 1579-1593.

Chan, Louis K.C., Narasimhan Jegadeesh, and Josef Lakonishok, "Evaluating the Performance of Value Versus Glamour Stocks: The Impact of Selection Bias," _Journal of Financial Economics_ 38 (1995): 269-296.

Barber, Brad M., and John D. Lyon, "Firm Size, Book-to-Market Ratio, and Security Returns: A Holdout Sample of Financial Firms," _Journal of Finance_ 52 (1997): 875-883.

Fama, Eugene F., and Kenneth R. French, "Value Versus Growth: The International Evidence," _Journal of Finance_ 53 (1998): 1975-1999.

Capaul, Carlo, Ian Rowley and William F. Sharpe, "International Value and Growth Stock Returns," _Financial Analysts Journal_ 49 (1993): 27-36.


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## ubiquitous (11 Nov 2008)

zephyro said:


> There are many more if the below doesn't suffice.


_



Don't believe half of what you see and none of what you hear.

Click to expand...


Lou Reed
_


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## zephyro (11 Nov 2008)

lemur said:


> Growth stocks are the way to make money in the equities market. With all due respect the value investing argument is the way brokers off load stocks that nobody wants to the gullible public. O'Neill's books and many other studies have illustrated this.


 
What studies?


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## nuac (11 Nov 2008)

Smiley I thought Lemur's posts were knowledgable and helpful and I do hope (s)he returns to this board.

There are many views as to what is a good investment - that is what makes a market.


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## lemur (11 Nov 2008)

nuac said:


> Smiley I thought Lemur's posts were knowledgable and helpful and I do hope (s)he returns to this board.
> 
> There are many views as to what is a good investment - that is what makes a market.



Yes I am still lurking Nuac but best for me to avoid the arguments. 

A lot of myths and cliches around about the markets/shares/investments and once people have formed these views (sometimes absurd ones) they are not for turning.


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## croker (12 Nov 2008)

zephyro, thanks for posting those studies but you might be missing the point that I made about assumptions. I'm not talking specifically about value vs growth portfolios here, but in general, assumptions would be the period covered by the study, if a portfolio of stocks is tested the constituents of the portfolio, the entry and exit points(in reality would a value investor and growth investor enter at the same point?) etc. The studies must be making some assumptions and my point is that depending on the assumptions you can get radically different results. It;s the same as backtesting, most people who have done this know that they can prove or disprove a trading strategy depending on the test parameters. You might base your ideas on certain studies which is fine, but I would just say to others to question the assumptions made in the studies, whether it supports value or growth investing in this case.


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## investor1 (7 Jan 2009)

The value versus Growth debate has gone on for years and is really a grey area, Can someone do me a favor and define what is value and what is growth? and is there such a thing as a cheap growth stock


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## Supergirl (15 Dec 2009)

Marc said:


> Very Interesting question and well timed!!
> 
> We are actually considering running a seminar on this very subject in Dublin and would be interested in assessing the demand out there.
> 
> ...


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## Supergirl (15 Dec 2009)

Marc,

I am an avid beleived of value investing. However, I am finding in difficult to take the first steps in actually purchasing indices. I want to purchase low cost index funds (S&P 500, EUROSTOXX, FTSE etc.) over the long term using dollar cost averging. (hope to keep 1/3rd of funds in foreign currrency).

-I am aware that its is very difficult to keep brokerage and investment managment companies costs low. It appers that our brokerage costs in Ireland are very expensive? What brokers (or any other options) would you recomend?

-How does one go about actually putting a value investment portfolio (low cost indicex) into action. It seems complex to determine which company?

-Although I have a portfolio plan: I would feel more comfortable if I could talk to someone that regularly works in this field and has an appreciation for value investing. How should I go about finding such a person?


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## trekkypj (21 Dec 2009)

First time poster. Glad to see this thread!

While I'm involved with our family business and help run it, I'm not an investor myself so I don't propose to advise anyone - but I have begun buying books on the subject of investing, including value investing. One of the titles I bought was a copy of Graham and Dodd's 'Security Analysis'. Coincidence? 

Anyhow these are my naive thoughts - feel free to rip them up. I won't be offended.  Because I'm interested in the topic, I've tried to read as widely as possible and keep my mind open. From what I've read, there are many and different and sometimes opposing views. I'm sure they all have their merits.

But to an ignoramus like me, although the markets may be moving slowly towards an efficient market, even someone like me can see that Bank of Ireland's share price moving to 19c a share undervalued the stock, even with all the debt the bank is holding, and was not a result of an efficient market. More like investor panic. Graham's Mr Market having a nervous breakdown.I'm not for one moment saying that growth investing is bad and value investing is good - I would think that, like most things, there are different valid theories and methods for different sorts of investors. For some, growth stocks work. And fair dues to anyone who does well out of it.

For myself, I've learned the hard way that while making money quickly in any sort of business is easy - keeping it is hard. We have a family business which is tiny but ticks over nicely because we focus on the fundamentals - the running of a good business. That means understanding cash flow and proper asset depreciation, and how to allocate very limited capital so that we can keep the business solvent and making money even in the worst of times. From what I gather, value investing regards investments as first and foremost putting money into a business, rather than speculation on the stock market. It makes sense for an investor, whether it's as a business owner or an investment holder, to do their homework. The fundamental rule is being able to read balance sheets and cash flow statements, to know the business itself and the industry in which it operates. Just as you would expect to take a good look look at your rivals if you set up a company to make chairs, or sell retail goods.

The problem is that some people see it as being limited - and of course it is. It's being a business owner once removed, and that requires discipline and a willingness to learn the mechanics of running a business, and knowing when not to act is far more important than when to act. Just as some people aren't cut out to run a business because they lack the acumen or couldn't stick it (and nothing wrong with that!), some people will find value investing unattractive and boring. The point is that people should focus on their strengths. I like the concept of value investing - it fits into my own philosophy of knowing a business and acting as an owner. Which, as a shareholder, you are. And if I held shares, I'd want them to be in stable, solid businesses which generate a steady return and are well run enterprises focused on delivering good returns rather than overreaching itself through over-hasty growth.

Someone mentioned book value - it's a good guideline but book value doesn't always imply intrinsic worth. You have to be able to look beyond it, IMHO. It's just one way of measuring how good a business is. You also have to look at the cash flow net of expenses and the cost of asset replacement over time. Something which should be better taught in Leaving Cert Accounting, IMHO.

If there are classes being organised, I'd certainly like to learn more about value investing in practice - do keep us posted!


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## Rory Gillen (22 Dec 2009)

Heated debates!!

I think, myself, that value investing is easier for most because it demands no precision regarding the future. Rather, it measures the value you can buy today, and normally that value is high when newsflow is poor. If you believe in 'reversion to the mean' then in many cases value stocks can recover and deliver above average returns if they have been oversold in the first place. But as pointed out here already, wide diversification is necessary for success.

Growth stock investing works off different disciplines. Few can practice it like Buffett, as I believe that requires greater skills than most of us have. That said, practising it like William O'Neill (ala momentum investing) can be as rewarding as value investing but it takes more care & maintenance, in my experience. 

The website I run www.investrcentre.com teaches specific value investing approaches in the UK, US and Irish markets. I used to add in a growth stock investing module but gave up when I recognised that many could not adhere to the rules involved (or maybe my rules were not suitable).

Self promotion I guess, but I can back it up with good sensible facts either directly on the website or on the 1-day seminar I run for those interested.

Rory Gillen


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## Chris (23 Dec 2009)

trekkypj said:


> While I'm involved with our family business and help run it, I'm not an investor myself so I don't propose to advise anyone - but I have begun buying books on the subject of investing, including value investing. One of the titles I bought was a copy of Graham and Dodd's 'Security Analysis'. Coincidence?


Excellent book, but here is a recommendation, don't just read it, study it. Have a pen and piece of paper at hand to take notes as there is a lot in it.



trekkypj said:


> But to an ignoramus like me, although the markets may be moving slowly towards an efficient market, even someone like me can see that Bank of Ireland's share price moving to 19c a share undervalued the stock, even with all the debt the bank is holding, and was not a result of an efficient market. More like investor panic. Graham's Mr Market having a nervous breakdown.


I actually think that 19c would still overprices the two large Irish banks. If it wasn't for the bailout, they would be bankrupt, i.e. 0c per share. However, it is a reasonable analogy and example of Mr. Market.



trekkypj said:


> From what I gather, value investing regards investments as first and foremost putting money into a business, rather than speculation on the stock market. It makes sense for an investor, whether it's as a business owner or an investment holder, to do their homework. The fundamental rule is being able to read balance sheets and cash flow statements, to know the business itself and the industry in which it operates. Just as you would expect to take a good look look at your rivals if you set up a company to make chairs, or sell retail goods.


I couldn't agree more, if you are going to invest in a company you have to know what kind of shape the company is in.



trekkypj said:


> Someone mentioned book value - it's a good guideline but book value doesn't always imply intrinsic worth. You have to be able to look beyond it, IMHO. It's just one way of measuring how good a business is. You also have to look at the cash flow net of expenses and the cost of asset replacement over time. Something which should be better taught in Leaving Cert Accounting, IMHO.



Yes, price-to-book value does not tell you anything about how well the company is doing, but it is a very good measure to gauge if a company is selling at a discount. Some of my best investments have been when buying shares at or below a price-to-book value of 1. This usually happens very rarely, but the financial crisis has dramatically increased the number. To judge how well a company is doing you need to look at cash flow, debt level, return on investment, price-earnings, etc.
When I started investing I had my dad's experience as a medium size business owner and value investor to fall back on, which was a great help. But I think that actually running a business yourself, as you do, will be of huge benefit to you.


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## Rory Gillen (24 Dec 2009)

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