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What is value investing?
Value analysis is based on the methods pioneered by Benjamin Graham and described in the book ‘The Intelligent Investor’. Value investing is a method of choosing investments using an analytical framework rather than ‘stratospheric IQ, unusual business insights or inside information’ or an economics degree. The section in quotes comes from Warren Buffett’s preface to the fourth revised edition. Value investing requires the investor to understand the relationship between the price he or she is paying for an investment and the real value of the investment.
The most basic measure in value analysis is the relationship between price and earnings. Earnings is also referred to as profit. So, a company that has a share price that is 16 times the earnings per share might be considered to be fairly valued. Share prices that are trading at more or less than 16 times earnings can be considered expensive or cheap. The relationship between price and earnings is not the only statistic available to value investors, but is one important way of allowing an investor to judge whether to make an investment or not.
How is value investing used on this website?
The research available on this site is value analysis as described in ‘The Intelligent Investor’. This research can be used by investors to guide their investment choices.
‘The Intelligent Investor’ and the more in depth book, ‘Security Analysis’, are used as a guide for creating the investment research reports available on this site. Investors and students interested in more detail about the methods for assessing investment in listed securities can read ‘Security Analysis’ by Benjamin Graham and David Dodd as well as ‘The Intelligent Investor’.
In the introduction to the fifth edition of the Intelligent Investor the author comments that it is an illusion ‘that leading common stocks can be bought at any time and at any price’ with assurance of an ultimate profit’. The aim of the analysis on this website is to provide the investor with some guidance on whether the price available to purchase a security is a good or reasonable price.
One of the features of the research analysis available on this website is an assessment of the current price of a listed security against the earnings and assets that create the value in the listed security.
Benefits of value investing
The benefits to users of value investing research on this site and of the value approach in general are:
- Better investment returns
- Lower risk
- Less effort in managing investments
- Reduce mistakes
The results are achieved through comparing price with:
- Book value.
The value analysis in the research also asks whether the enterprise is large or prominent within its industry. Then the research covers the financial structure of the enterprise to show whether the enterprise is conservatively financed.
Once the research has covered all the basic exhibits we look at depreciation, return on equity and any other statistics, which may help the decision to make an investment. Advanced or ‘entrepreneurial’ value investors will find these other statistics helpful.
The bulk of the research covers five main areas, which allows defensive value investors to make a decision relating to an investment. The areas covered are listed here.
- Size of the enterprise.
- Financing of the enterprise.
- Dividend history.
- Current earnings and earnings history.
- Book value or net asset value.
If an enterprise has more than one security, we will sometimes create separate reports for the relevant securities. Research reports are available for bonds, preferred stock and common stock. Investors can choose the most appropriate type of security to use as an investment vehicle.
The data for the analysis in the research reports comes from corporate annual reports. The research reports summarise and analyse the financial information from 10-20 years’ worth of annual reports. Members of the research site can use the reports to put together a portfolio of securities without reading all the annual reports.
There is a sample report available for download so that you can see the kind of research that is available for members of the research site .
Once you click the link for the Apple free sample follow the purchase process to get access to the report. We will ask for e-mail address and billing information to allow us to send the report to you, but we will not then spam the e-mail address.
Please add your e-mail address to the e-mail form at the bottom of this page and we will inform you when we add new research reports.
Alternatively you can get the report by clicking on the link below.
If you think the research in the sample report would have value when making your investment decisions there are two ways of getting the information.
The first option is to purchase reports individually. You can access the reports by clicking the button below.
Or you can select reports categorised by date or industry sector by clicking on ‘Select a category’ under ‘Report Categories’ on the left of this page or most pages on the site.
Become a member to access all reports
The other way to access the research is to join the research site as a member. The research site will have a minimum of two new reports every month with new investment ideas for value investors. The reports will mostly focus on ideas to help investors purchase listed securities, which have good value characteristics. Occasionally, we will identify overvalued securities with warnings that value investors should avoid, sell or possibly short a particular security.
Mostly the reports are aimed at buying securities with the potential to be held for long periods of time. The securities will mostly have good income characteristics. Occasionally deeply discounted securities with significant capital growth potential will be covered.
To join our membership site for access to all the value analysis click the ‘Subscribe for our annual membership’ button.