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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Five great free value investing resources

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.” – Charlie Munger And so, here’s a short list of valuable value investing resources that I’ve found, offer insight into developing that mindset essential to successful investing. You’re much better off spending your time absorbing the content from resources like these than seeking out ‘Buy’ and ‘Sell’ recommendations in the pink papers. Farnam Street farnamstreetblog.com Named after the street in Omaha, Nebraska where Berkshire Hathaway keeps it’s headquarters, Farnam Street is run by Shane Parrish, who apparently worked with

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Confessions of a value investor

For the longest time in my investing experience, I felt like a bit of a fraud, when calling myself a “value investor”, the phrase so prominently visible on the header of this site. Here’s why. The definition of value investing, as introduced by the oft-quoted Ben Graham is quite simple: The strategy of selecting stocks that trade for less than their intrinsic values. Sounds simple enough. List all stocks along with their market prices (A). Add intrinsic value (B) as a column. Compute difference B minus A and voila! The stocks with the largest differences are your value stocks. Buy. Wait for

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Three value investing lessons from Graham and Dodd

Security Analysis by Benjamin Graham and David Dodd is probably the most “mentioned” book when it comes to value investing. First published in 1934, it was used as a required reading textbook in the course by the same name at Columbia Business School (apparently, now only the excellent preface to the 6th edition by Seth Klarman “The timeless wisdom of Graham and Dodd” is compulsory). The immense value of the book is in that it remains relevant, as a framework to think about investments, over 80 years after it was first published. Having heard all the revered references to this book, I first dived

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Developing a stock investment philosophy

At a glance Every investor needs a consistent basis for making all her stock investing decisions This basis allows the investor to stay the course in the face of short-term fluctuations Broadly two investment philosophies exist based on Fundamental Analysis and Technical Analysis TCI follows a value-stock investment style that looks for out of favour sectors at reasonable P/Es An investor should pick a style or philosophy that aligns with his temperament and proceed to refine it as he gathers more experience in stock investing In the last post (Election 2014 fever and deciding when to buy), I introduced Philip

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