Value investing is an investment strategy popularized by Warren Buffett. I am not a fan of it, agree with Elon Musk. Once Elon said: Warren Buffett reads a lot of annual reports of companies, pretty boring.
But we still need to learn how value investing works, because without that you can never understand mainstream media financial programs.
Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investing is the process of doing detective work to find these secret sales on stocks and buying them at a discount compared to how the market values them.
Value investors believe in the long term, which I really like. Buffett’s opinions like the famous farm analogy, UJJJJJJJJJJJJJJJJJJJJJIRT \]\\\\\too much diversification is for the ignorant, and so on were very inspiring to me.
Some metrics used to value a company’s stock include:
Price-to-book (P/B) or book value, which measures the value of a company’s assets and compares them to the stock price. If the price is lower than the value of the assets, the stock is undervalued, assuming the company is not in financial hardship.
Price-to-earnings (P/E), which shows the company’s track record for earnings to determine if the stock price is not reflecting all of the earnings or is undervalued.
Free cash flow, which is the cash generated from a company’s revenue or operations after the costs of expenditures have been subtracted.
There are others too, but I think it’s clear by now that, value investors rely a lot on the financial numbers to judge its so-called fundamentals.
Value Investing does not favor innovation. That’s why I believe it is outdated.
In today’s world, because of the Internet and modern technology, if you have a good idea, it can become a very profitable business very very soon. Because of this, for the earlier years of a good company, investors do not mind they run at negative earnings, which means an infinite PE ratio is very common. which will drive the value investors crazy.
Value investors are mostly old and stupid.
Yeah, that is it for value investing. More time should be spent on learning technology and important business first principles like network-effect or scale of economy.