Sunday, October 10, 2010

Are You a Value Investor?

I guess it's finally to start the blogging about a topic I am a little more than passionate about.  If you are like me, you've likely spent some time reading various blogs and find alot of keystokes but very little relating to value investing.  We'll hopefully I can change that. 

To start things off, I do want to start with a little quiz to see if you are truly a value investor.  While I don't claim to be an expert, I have read almost everything written about Warren Buffett and his mentor Ben Graham (no relation).  What I find interesting is that much of what Buffett preaches is repeated but not followed.  I have checked out hundreds of websites on value investing and then when you check out their stock picks things just don't add up.  You will find almost everything under the sun being justified as a value investment and every company has a huge moat.  The truth is there are very few companies with a moat, and I would go further saying any company under a billion dollars in annual sales has no moat whatsoever!

Before we start off on that topic it is time for our quiz.  Some may question what many of these have to do with value investing, if you find yourself asking this your not a value investor.


1.  Have you ever read Ben Graham's book "The Intelligent Investor", from start to finish?  If you have skimmed chapters 8 and 20 that doesn't count.

2.  Have you ever read Ben Graham & David Dodds's book "Security Analysis", from start to finish?

3.  Have you held at least one investment for more than 5 years?

4.  Have you held at least one investment for more than 10 years?

5.  Do you find yourself reading annual reports (or a lot of reading in general) in your spare time or do you go to gurufocus.com for your investment ideas?

6.  Do you read every annual and quarterly report of all stocks in your portfolio?

7.  Have you ever found some interesting facts buried in an annual or quarterly report?

8.  Do you use excel to determine if a stock is over or undervalued? 

9.  Have you ever had an original idea, or have you found all of your investment ideas from others?

10.  Have you ever felt upset because stock prices are increasing?


While I could go on, I think that will separate the sheep from the goats.  The answers are yes to every question except number 8.  If you score over 5 you may be a value investor, if you score over 8 you are definitely a value investor and you will definitely enjoy this blog.

I know some of you will read the above questions and will know exactly what I am talking about and others will not.  I invite those who do relate to the questions above to stick around, while the rest of you will likely find it boring.  While I will post investment idea they may be few and far between.  More often than not inactivity will be my choice.  I will also use this blog to go on an occasional rant similar to what you will hear from Charlie Munger. 

For those who can relate to what I have posted please feel free to comment or email.  I would love to hear from you.

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