Value Investing News

Once I get my hands on the MJ Gleeson dividend and sell my bond holdings I'll have about £3,000 cash to invest; and Luminar is looking like a high risk high reward place to put it. This big nightclub operator is very cheap, both tangibly and intangibly. It doesn't have quite the low debt levels I typically like, but it doesn't seem to be drowning in debt either.

Both Shiller and Smithers and others have shown that it is possible to value markets and that market valuations are bound by an invisible elastic thread to both earnings and assets. More importantly, these valuations allow you to say something about the expected future returns.

"The fact that both the favorable and unfavorable situations are part of any normal long-term picture (and as a consequence both should be accepted without undue excitement) is evidently not part of the stock market's philosophy.

"In the old days any well-trained security analyst could do a good professional job of selecting undervalued issues through detailed studies; but in the light of the enormous amount of research now being carried on, I doubt whether in most cases such extensive efforts will generate sufficiently superior selections to justify their cost" (Ben Graham)

I've long been fiddling around with various mechanical methods of adjusting an almost passive index investing stragety to improve the risk/reward ratio. This is sometimes known as Tactical Asset Allocation (TAA). The same general idea can be applied to the cash or bond allocation within a stock picking portfolio.