As value investors go, I am an inclusive kind of guy.? I’m not doctrinaire about what measures constitute value.? What is the correct model?? Well, if you could gather all of the data successfully, it would be something akin to the model Mike Mauboussin’s Expectations Investing.? The easy shortcuts of value investing are stripped-down versions of this (possibly impossible) model.? Oh, shortcuts?? Here are a few:
- Price/Earnings
- Price/Book
- Price/Tangible Book
- Price/Sales
- Dividend Yield
- PEG ratio (Growth at a reasonable price)
The shortcuts are usable, with some discipline.? I’m not sure about the theory itself: I’m sure it is correct; I’m just not sure it can be implemented.? (Hey, maybe Legg Mason has tried to implement it.? Wonder how they have done with it? 🙁 )
More usable are several speeches from noted value investors.? They won’t tell you what stock to buy, but they will teach you how to think about the equity markets.? So, here are three speeches I ran across recently, from:
From my time writing for RealMoney, I know what motivates most investors is the next hot idea.? Sadly, that does not produce value for investors.? Here and at RealMoney, though I will willingly talk about the stocks that I own, I would rather talk about how to think about portfolio management — thinking rationally about what assets will build the most value in the intermediate-term.? That will give readers much more; they will be able to think independently, and create value on their own, using experts as guides, but not being slaves to any other investor, including me.
If you haven’t seen it, the report from Tweedy Brown referred to in the Christopher Browne speech is a great report. I’m not sure when it was written, but the studies in here run from 1967 to 1984, so are not biased by the huge bull run at the end of the century. http://www.tweedy.com/library_docs/papers/what_has_worked_all.pdf
Definately worth a read and I keep a printed copy on my bookshelf for easy reference.