How to Make Money in Value Stocks
How to Make Money in Value Stocks
Everything you need to get started in Value Investing
About the Book
Very few investors can resist the idea of seeking out a bargain but most have no idea how to do it. Too often, new investors in the stock market are seduced by the latest frothy IPO or the hot exploration stock that all the brokers are talking about. This book is about how you can make better profits in the market by focusing on neglected value stocks using some simple, modern and effective techniques. It explores the origins, the concepts and the specific methods used by Benjamin Graham and some of the world’s most famous Value Investors as a means of generating phenomenal wealth. At a time when investors are bombarded by information & opinion at an almost unbearable rate, this book is a critique of what's really important. It assesses what works and why and how individual investors can avoid group-think and apply ‘City grade’ information, thinking and investment models to their own advantage.RECENT REVIEWS"An excellent reference point for anyone looking to get to grips with analysing companies and picking winning investment strategies. The book offers a great introduction to the various investment tactics utilised by the world’s leading value investors [but] it is also about equipping readers with the right mix of both quantitative techniques and qualitative insights to ensure that they can make sense of company accounts and evaluate the merits of investing in each stock," Philip O'Sullivan"A very comprehensive overview of "fundamental" investment techniques and the rules used by the masters", UK Individual Investors Society (ShareSoc)"I thoroughly enjoyed the whole book – it’s well-written, breezy and generally strikes the right balance between overview and detail.. [Its] brevity is actually a big plus. Too many finance/value investing books fail to hold a reader’s attention – they gloss over the details and/or offer no practical ‘how to‘ advice, or bury the reader in an avalanche of formulas & footnotes. Value Stocks gets the balance just about right though, and is much more than just a value investing primer", Value Blogger Wexboy"Good for people new to investing, as it covers a lot of the basics, and various strategies that one can employ. More experienced investors are likely to pick up a couple of tricks along the way, too", Mark Carter"It is only 70 pages “short” and tries to introduce and summarize all relevant “schools” of value investing. The book in my opinion is very well written. I liked especially the very “fluid” language, the very clear and easy to read layout and the many links they have at the end of each chapter. I think its the perfect short book for anyone who wants to get a short well written overview on general value investing principles", Value and Opportunity blog
Part 1: Who, Why, What?
Chapter 1: What is value investing?
- Value investing is simple…
- …but it’s not easy…
- Which is precisely why it works
- There are many approaches to harvesting value profits
Chapter 2: How profitable can value investing be?
- Introducing an academic that made a fortune
- A lucky class…
- Talented coin flippers?
- Eventually even the academics start to cave…
Chapter 3: Why does value investing work?
- Why do stocks become excessively cheap?
- What real world catalysts drive stocks to extreme values?
- How do value stocks get re-priced?
- How long can it take for value to ‘out’?
- So what have we learnt?
- Chapter 4: Why can’t someone value invest for me?
- Chapter 1: What is value investing?
Part 2: Foundations, Principles and Key Ideas
Chapter 5: Five key principles
- Key Principle 1: Price is not value
- Key Principle 2: Mr Market is a crazy guy
- Key Principle 3: Every stock has an intrinsic value
- Key Principle 4: Only buy with a margin of safety
- Key Principle 5: Diversification is the only free lunch
- Making sense of value investing principles
Chapter 6: The Hunter or the Farmer - choose your approach
- The Hunter – or fundamental stock picker
- The Farmer – or quantitative portfolio investor
- Be careful not to be a hunter-gatherer…
Chapter 7: Six essential ratios for finding cheap stocks
- Price to Book Value - buy assets on the cheap
- Price to Earnings Ratio (P/E) – buy earnings on the cheap
- The Earnings Yield (or EBIT / EV) – buy earnings on the cheap
- Price to Cashflow - a good catch all?
- Price to Sales Ratio – No earnings? Buy sales on the cheap
- PEG Ratio – Buy earnings growth on the cheap
Chapter 8: Six essential clues to finding good stocks
- Three financial clues of a good company
- Three qualitative clues of a good company
Chapter 9: How to calculate what a stock’s worth
- We all know how to value a house… don’t we?
- The joys and dangers of relative valuation
- Choosing your weapon… assets or cashflow
- One for the pessimists – valuing earnings without forecasts
- What would Buffett do?
- Chapter 5: Five key principles
Part 3: A Review of the Strategies that Work
Chapter 10: Buying deep bargains or “cigar butts”
- Not for the faint-hearted
Chapter 11: Buying bargains on the mend
- Spotting turnarounds fast with the Piotroski F-Score
- Filter out financially risky stocks with the Z-Score
- Filter out earnings manipulators with the M-Score
- Diamonds in the dirt
Chapter 12: Buying bargains on the move
- Value with Momentum
- So how did it do?
- Is momentum a signal of a hidden catalyst?
Chapter 13: Buying good companies cheaply - a “Magic Formula”
- Putting trust in the ‘quant’
- Can Beddard’s blend beat them both?
Chapter 14: Buying quality at a fair price - Buffett
- Warren Buffett’s background
- Investment strategy
- Should you try and invest like Warren Buffett?
- Chapter 10: Buying deep bargains or “cigar butts”
Part 4: Risk Management
- Chapter 15: How risky is value investing?
Chapter 16: How to avoid buying value traps
- What is a value trap?
- Top 10 signs that your stock may be a value trap
Chapter 17: How diversification can lower your risk
- Is just a few stocks enough?
- But the number of stocks you own isn’t the only number to watch
Chapter 18: How to know when to sell
- Cut your losses, run your winners
- Should Value Investors use stop-losses?
- You won’t always be right
- Recognising failure is hard
Part 5: Search and Destroy
- Chapter 19: Where can you find value stock ideas?
Conclusion: Go forth and multiply
- Will the value opportunities ever run out?
- Appendix: About Stockopedia
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