Which value metric works best?

I recently undertook a quick and dirty backtest on NIFTY stocks to verify whether buying a portfolio of the cheapest index stocks and rebalancing annually would beat the broader index. In spite of the fairly short period under test (nine years from 2008 to 2017), if you’re a value investor, the results are encouraging. From Sep 2008 to Aug 2017, ignoring transaction costs and dividends, a 10 stock value portfolio returned 18% annually compared to 9.8% for the NIFTY. The details of the test and outcomes are in the post ‘Can buying cheap NIFTY stocks beat the index‘ For this test,

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Mean Reversion: The Value Investor’s secret weapon

  Successful Equity Investing To become an equity investor, you need three foundational elements: to tell a fundamentally strong company from one that is not based on it’s financial statements, it’s business model, and the dynamics of it’s industry to put those fundamentals in the context of the prevailing market price and how those prices are subject to variation based on swings in the nebulous concept called market sentiment, and to recognise, and protect against the potential influence of those market sentiments on our decision-making i.e. our susceptibility to behavioural biases when making investment decisions These elements are common sense, but they take a lot of conscious effort

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Markets this quarter and a game of dominoes

At a glance Indian markets have just ended their best quarter in five years – Valuation metrics tell differing stories – Nifty P/E say “expensive” but P/B say “fairly priced” – History suggests the interplay between the two reveal prevailing themes of investor expectations – Current expectations count on a bunch of interconnected things going right – Overly optimistic short-term investors might be rudely shocked – “Watchfully optimistic” should be the theme for calm investors After the frothy action in May, June 2014 saw some semblance of normality return even though the direction of the overall index remained the same, UP.

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