Concise Guide to Value Investing E-Book

Brian McNiven

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 260

Veröffentlichungsjahr: 2012

Beschreibung

The business performance creates the value -- the price creates the OPPORTUNITY.

No-one likes to pay too much for something. We all like to thing that what we buy is ' good value'. It's not different when we purchase a share in company listed on the stock market.

In the Concise Guide to Value Investing, Brian McNiven reveals how to calculate the true value of a company to find out whether you  are paying a fair price. This fascinating book explores:

• value investing versus speculation
• the difference between price and value
• variable values of a dollar of earnings
• accounting misrepresentation
• the characteristics of a wonderful business
• the StockVal® valuation formula.

Two of the world's most successful investors, Warren Buffett and Charlie Munger, are self-confessed value investors. McNiven often draws on their wisdom to support his approach to value investing,which he defines as buying a share at a price lower than its calculated value. Only investors who have the ability to calculate value can call themselves 'value investors'.

Leseprobe

Contents

Preface

Chapter 1: What is Value Investing?

Value Assessment Does not Rely on Precision

So-called ‘Value’ and ‘Growth’ Stocks

EPS Growth

Chapter 2: Dividend Huggers

Chapter 3: Price and Value

The Efficient Market Hypothesis

Fundamental and Technical Analysis

Reversion to the Mean

Market Sentiment

Chapter 4: Portfolio Diversification

Chapter 5: Variable Values of a Dollar of Earnings

Numerical Literacy

ROE

Summary

Chapter 6: Stock Valuation

Is a Business Worth the Sum of its Future Cash Flows?

The Price of a Business

Measuring the Business Performance

Normalised Earnings

The Formula’s Logic

Considerations

Intangibles

Return on Funds Employed (ROFE)

Conclusion

Chapter 7: Accounting Misrepresentation

Mining Expenses

Marketing Costs

Research and Development

Economic Erosion

Alternative Methods of Determining Earnings

Chapter 8: Characteristics of a Wonderful Business

The Business Moat

Chapter 9: Sustainability of Business Performance

Competition

Change

Ethical Iinvesting

Commodity and Brand-name Businesses

Chapter 10: Growth, Acquisitions and Buybacks

Growth

Acquisitions

Buybacks

Chapter 11: Evaluating Corporate Management

Reading the Footprints

Stock-price Promotion

Dangerous Statements

Remuneration

Options

Chapter 12: Economic Impact of Interest Rates

Impact of Interest Rates on Stock Prices

Intangible Security

Chapter 13: Financial Fundamentals

Working Capital

Debt Ratios

Equity Ratio

Inventory Turnover

Debtors and Creditors Ageing Statements

Enterprise Value

Chapter 14: When to Sell

Selling Issues

Chapter 15: Strategies and Considerations

Property Trusts

The safest Investment of all

Dollar Cost Averaging

Understand the Power of Compounding

Managed Funds

A Tip for Self-protection

How Many Stocks Should you Hold?

Stocks Likely to Produce Less-than Satisfactory Long-term Results

Positive Attributes to Look for

The Capitalist Social System

List of Abbreviations

Index

Also by Brian McNiven:

A Wonderful Company at a Fair Price

Published by and available from Wrightbooks

First published 2008 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Typeset in 11.5/14.5 pt Warnock Pro

© Brian McNiven 2008

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Author: McNiven, Brian.

Title: Concise Guide to Value Investing / author, Brian McNiven.

Publisher: Richmond, Vic. : John Wiley and Sons, 2008.

ISBN: 9780731407934 (pbk.)

Notes: Includes index.

Subjects: Investments. Stocks. Corporations — Valuation.

Dewey Number: 332.6

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

All quotes from Warren Buffett and Charlie Munger are copyrighted and reproduced with permission.

Cover image © Photodisc

Disclaimer

The material in this publication is of the nature of general comment only, and neither purports nor intends to be advice. Readers should not act on the basis of any matter in this publication without considering (and if appropriate taking) professional advice with due regard to their own particular circumstances. The author and publisher expressly disclaim all and any liability to any person, whether a purchaser of this publication or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance, whether in whole or part, upon the whole or any part of the contents of this publication.

Preface

Although ‘margin of safety’ (being the difference between price and value) is said to be the most important consideration of the world’s greatest investors, Warren Buffett and his partner Charlie Munger, what good is it to be told that with no explanation of how value is calculated? It’s not surprising that Buffett himself remarked in 1985:

I have seen no trend toward value investing in the 35 years I’ve practiced it. There seems to be some perverse human characteristic that likes to make easy things difficult.

I am more inclined to think that there is some perverse human characteristic that fails to see the connection between value investing and assessment of value. For instance: have you ever asked an investment adviser who recommends a stock on the basis that it represents good value what value he or she places on the stock and what numerical assumptions he or she used in arriving at that value? In the investment world, no other word is so often used and so little understood.

In likening stock valuation to the problem of solving the St Petersburg Paradox, even the accredited securities analyst Benjamin Graham avoided tackling the issue, favouring the more simplistic approach of considering the relation between price and book value.

Although the objective of all investors is to seek superior returns with minimal risk by acquiring stocks in wonderful businesses at a price that represents good value, if they do not know how to calculate value, the objective is achieved by chance, rather than design.

This book will help you reduce your risks and maximise your rewards by providing you with a thorough understanding of value investing and how to determine the true value of a company.

Brian McNiven

Gold Coast

February 2008

Chapter 1

What is value investing?

If we acknowledge that investing is the intention to seek a required rate of return (RR) relative to risk based on an assessment of value, then all investing is ‘value’ investing. The deployment of capital in the absence of assessment of value is called speculation.

Although the art of speculation is covered by numerous books on stock trading and technical analysis, why is it necessary to use a tautology by including the word ‘value’ in the title of a book on investing? After all, would it not be equally foolish to refer to a car as an ‘automobile car’ or an ATM (automatic teller machine) as an ‘ATM machine’?

That the market sees value investing as different from normal investing implies that the very factor on which investing is based is little understood, and therefore nearly always ignored.

Value assessment does not rely on precision

Warren Buffett once said, ‘I’d rather be approximately right than precisely wrong’. Stock valuation is subjective in that it requires a judgement of the sustainability of past profitability, and is therefore far from being an exact science. Like price, value will not increase in neat, even increments year after year, but will vary with the changing fortunes of the business.