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What?
Value investing is a popular stock-picking method. Benjamin Graham and David Dodd, finance professors at Columbia University, laid out what many consider to be the framework for value investing. The concept is actually very simple: find companies trading below their inherent worth. Warren Buffet is the second riches man on earth by this article made, uses this strategy.
How?
Value investing uses screener to choose stock. The basic of the screener is:
• Low price, can be seen through it’s Price Earning (P/E) Ratio and Price Book Value (PBV)
• Good growth, through it’s Earning growth.
• Safety, no more debt than equity, and current asset should be two times current liabilities.
• Income, the stock should give us sufficient dividend yield, at least two-thirds of the long-term AAA bond yield.
How’s the performance?
According analysis done by many people, stock with low P/E usually beat other stock in return. But you must remember that not all low P/E is a good stock, maybe people won’t buy low P/E stock because the company has poor earning. The second riches person uses this strategy, so there is proof of the goodness Value investing.
For who?
Value investing is long term horizon, more than 1 year. So if you’re patient, then maybe this is your stock pick style.
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