Value Investing - Courses in Dublin? and Advice please

[nuac]

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.

 

[lemur]

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.

 

[croker]

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.

 

[investor1]

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

 

[Supergirl]

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]

 

[Supergirl]

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?

 

[trekkypj]

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!

 

[Rory Gillen]

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

 

[Chris]

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.

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.

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.

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.

 

[Rory Gillen]

xx