Value Investing

Value Investing describes a certain stock market strategy for which investments in shares are made based solely on their fair value. 

The ultimate goal is to minimize the risk of losses and to outperform certain benchmarks in the longterm.  

Value Investors - Stock Picking

Value investors are continuously searching for undervalued shares. This behaviour is described as stock picking. By doing so, value investors are trying to determine the fair value of their analyzed shares by using the so called fundamental analysis. For their investment decisions value investors are for purpose using price calculation inefficiencies at the stock markets. They are trying to buy shares for prices that are considered to be below their current fair value. This difference between fair value and market price is called margin of safety. It is being used as a safety margin by value investors to limit the risk of losses. After having bought the a certain share, value investors will wait for the price of the share to rise at the stock market until the share has recovered from ist undervaluation. In the best case scenario the price will rise until even a overvaluation will occur. It is of great importance for value investors to continuously check the fair value of their investments compared to the stock market price. In case of any changes over a specific period of time the value investor has to take action and has change the investment portfolio. 

Value Oriented Key Performance Figures

The fundamental analysis for investments compares companies based on financial figures and also based on ratios of different financial performance figures. The required information can be taken from balance sheets and annual / quarterly reports. Very often ratios are being calculated also based on the current stock market price in combination with key performance figures. 

The most important key performance figures are: Price-Earnings Ratio (P/E Ratio), Price-to-Book Ratio (P/B Ratio), Price-Sales Ratio (P/S Ratio), Price-Cashflow Ratio (P/C Ratio). 

10 Golden Rules for Value Investors

1. Never invest into the stock market with borrowed money!

2. Don't buy expansive!

3. Don't sell cheap!

4. Invest only in companies with comprehensible business models!

5. No forecasts based only on the past!

6. Diversify (share the risk amongst multiple investments)

7. Look at longterm chances of one company!

8. Look at the management of one company!

9. Analyse the financial situation of one company!

10. Look at the historic, actual and forecasted dividend payments of one company!

How does fiananzoo.de support you to follow these rules?

Nobody can foresee the future. Psychologically people are always looking for patterns, e.g. the chart analysis. These patterns will continue or proof true for some time but will never hold forever. 

“With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices.    ” ― Benjamin GrahamThe Intelligent Investor

Finanzoo.de thus provides fundamental data of the past condensed into the FScore key performance figure as a basis for investment decisions for the future. The FScore systematically and transparently takes into consideration rules 2, 3, 7, 8, 9 and 10. 

Of course, the intelligent investor in the end always is the one to make the final decision wether or not to invest into one company. 

 

Finanzoo.de supports value investors

Finanzoo.de supports value investors at all of these stages. Firstly by filtering and screening shares based on their fair value. This is being done by fundamentally analyzing balance sheets.

Secondly also after the investments by supporting to monitor the portfolio regarding the development of the stock market prices compared to the development of the fair value of one share.