This post is resource page for those who wish to become value investors. First, I have to admit something…I am not really a value investor…yet! Value investing is the “methodology” of investment that I appreciate the most and I wish to practice value investing as a pastime (I want 50% of my portfolio to derive from value investing). But, let’s face it… I am a PhD finance student! So you know like me that there are few finance researchers that are successful investors or actually talk about their own personal finance experience. Have you ever heard a researcher in finance bragging about their successful investments? Not much right? In my case, I started to invest at the end of my bachelor studies – quite late I have to say – but that is when I had enough money to open an account with a discount broker and to really buy and diversify a portfolio (you don’t need much actually to start with…let’s say $5,000?). During my masters, I had received few bursaries that allowed me to save more money and invest. I first started investing my money in index funds such as short-term bonds, emerging markets, broad Chinese market (not covered in traditional emerging market index funds), international MSCI, and the U.S. stock market. My first purchase of an actual stock was Wells Fargo — after a sudden drop in the market. There wasn’t much rational analysis behind this purchase. I was only taking advantage of a sudden, somewhat irrational, drop in the market. You know like me that Wells is a solid business as we speak (according to Buffett).
Over the course of my bachelor and master studies, I read some books and blogs on value investing. Despite the fact that my research specialty that I wish to develop through my PhD has nothing to do with value investing, I want to share all the great resources that I found and will continue to find on the subject. I also do this for my future students… I wish I had a professor that would have done the same : )
How to get acquainted with value investing? (very briefly…)
First and foremost you must read “The Intelligent Investor” by Benjamin Graham. This step is crucial! Next, I would jump on reading multiple blogs on the subject of value investing. Many give insights on their successful investments, analyze various stocks using the value investing methodology and show you their steps of analysis, provide you with resources to evaluate your own stocks, give you multiple insights on which stock that you should pay a close attention to, and more importantly learn from their mistakes!
The Frog’s Kiss – very detailed and well written analysis of stocks
Oddball Stocks – detailed and super clear analysis of net-net stocks (and other types). Also pays close attention to international stocks. One of my personal favorite blogs
Above Average Odds Investing – very popular and detailed analysis of stocks
Barel Karsan – covers various topics on value investing
Classic Value Investors – covers various topics on value investing, provides interviews with financial managers, and some stock analysis
Old School Value (OSV) – One of my personal favorite website on value investing. Provides analysis, various insights, and more important the author of this site developed an amazing value investing tool to analyze stocks (more on that later)
Tools of analysis
Once you get the habit of paying a close attention to these blogs (use Google Reader to keep track of blogs!) I highly suggest you to turn to Old School Value stock analysis tool for $137 (really good investment – trust me!). For individual like us who can’t really put our hands on Capital IQ or Bloomberg – this is the best tool out there. And to some extent, I am willing to say that OSV stock analysis tool beats both Capital IQ and Bloomberg for its simplicity and on other aspects (price, etc.)
Key steps to follow in your valuation… basically how to invest!
A very good tutorial on how to invest in terms of what step to follow in your research and valuation of stocks is provided on the OSV website by the author’s friend Ernie. This tutorial is like a mental mapping of the steps to follow to increase your chance of success with your investments.
“Valuation Multiples: A Primer” is document written by UBS in 2001 on valuation multiples. It is clear, concise, and covers if not all the key valuation multiples: how to use the multiples in the valuation of a stock, their limitations / drawbacks, etc. This document was found by OSV and Jae Jun (the author of OSV) declares that this is the best valuation document available!
Benjamin Graham and David Dodd – Security Analysis … a masterpiece! I would suggest however the 1951 edition available here simply because you don’t need to go through the accompanied-CD for the appendices.
Many have told me that I must read this following book:
This book is out of print, really hard to find, but is available on the web in PDF (you have to search!). I haven’t read this one yet but I will!