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Education

Lesson on value investing

Intrinsic Value and Its Relationship to Margin of Safety

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There is nothing more important than Intrinsic Value and Margin of Safety in Investing! The purpose of estimating intrinsic value is to take advantage of mis-priced assets. The variables of this calculation determine your margin of safety.

Mebane Faber Shareholder Yield Backtest

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Meb Faber Shareholder Yield equals Dividend yield + Buyback yield + Net debt repaid yield. Check out the backtest of this fundamental.

Perceived Risk vs. Real Risk: A Key to Successful Value Investing

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Value investing involves searching for investments where the perceived risk is greater than the real or actual risk. The most favorable investing environment is high perceived risk and low real risk. The least favorable investing environment is low perceived risk and high real risk.

Free Cash Flow to Enterprise Value Backtest – $50 Million Minimum Market Cap

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This is a revised version of the backtest on the free cash flow to enterprise value ratio backtest posted a few weeks ago. The free cash flow to enterprise value ratio is a rather sophisticated valuation ratio that should be a part of every value investors toolkit.

Valuing Ally Financial: A Framework

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Curious about bank valuation? Here is a short primer and case study.

Key Performance Metrics And Beyond: Ally Financial

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For anyone Interested in learning more about investing in banks.

The Intelligent Investor Book Review & Summary

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The Intelligent Investor, by Benjamin Graham, may be the most important and valuable investment book ever written!! The following is a comprehensive review and summary that can be completed in less than 30 minutes.

Microsoft History Teaches Us An Important Price to Value Lesson

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Two investors buy the same stock, receive the identical amount of dividends, and sell at the same price. One earns a 203% total return and the other just 11%. The powerful lesson here:

The Value Investor’s Investment Risk Management Plan

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Value investors need an investment risk management plan that prevents a permanent loss of capital. This is my plan.

How to Calculate Return On Capital

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How Return on Capital is calculated and the differences between several versions of the calculation.

Free Cash Flow to Enterprise Value Backtest

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The free cash flow to enterprise value ratio is a rather sophisticated valuation ratio that should be a part of every value investors toolkit. Here's how it performed over the past 16 years.

What is Margin of Safety and Why Does Price Matter?

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Benjamin Graham called margin of safety “the secret of sound investment” and “the central concept of investment”. He also devoted a whole chapter to the concept and, I am confident, placed it last because it is the most important.

How to Avoid Value-Traps with Net-Net Stocks

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Net-net stocks are those which sell below liquidation value and are major bargains. Avoid being a victim of value traps by only investing in net-nets which:
1) Generate revenue
2) Experience NCAV Burn of less than 25% annually
3) Aren’t based in China or if you are risk averse, aren’t Chinese
4) Have sold at a price above the current NCAV in the past 5 years
5) Are not issuing shares
6) May experience an event in the near future if it is an asset-shell

Asset Correlation - Definition, Examples, Problems, and Why It’s Important

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The financial concept of asset correlation is important because the goal of asset allocation is to combine assets with low correlation in order to reduce portfolio volatility.

How Does a Change in Shares Outstanding Impact Stock Returns?

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My backtest indicated a 11.33 percent difference between the first and fifth quintiles in the 2000 to the end of 2015 time period.

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