How to be a Value Investor like Warren Buffett
Shopping for deals in the stock market is something for the value investor. It involves finding stocks trading below fair value. Akin to discount shopping name brand items at outlet malls, value investing involves identifying stocks of solid companies, with a history of consistently growing revenue and earnings per share (EPS).
By comparing the current stock price to the company's historical fair value it can give you a place from which to compare potential investments. Stock brokerage analysis tools such as the Recognia Inc. research kit allows you to plot price movement of stocks along the fair value line.
Choose Stocks Priced Below Fair Value
Prices that currently fall below this line represent good value stocks as they are expected to eventually rise to where they should be. Many stocks tend to trade far above fair value--typically hyped stocks with lots of investor appeal, the "next big thing" stocks and tech stocks.
What Would Warren Buffett Say?
If you follow this blog, you'll see frequent reference to the great Buffett and buffettisms of trading. Buffett is a life long value investor who has made gazillions of dollars buying and holding value and growth-worthy stocks. A $10,000 investment in Buffett's Berkshire Hathaway in 1965 would be worth 30 million according to Investopedia.
Buy and Hold Value Stocks
Buffett screens companies with respect to consistency of performance with return on investment (net income/shareholder's equity); the avoidance of excess debt (debt/equity ration); high and increasing profit margins; age of the company on the market (at least 10 years public); companies with unique products that do not rely heavily on commodities (external influence); value--is the stock selling at a discount of at least 25%? Although it's difficult to determine a company's true intrinsic value, value analysis can provide a good source of value investment direction.
Not for the Active Day Trader
Value investors are Warren Buffet fans--the buy and hold gang. As long as a company continues to grow and earnings chime in at their expected marks, the stock will remain attractive to the value invester.
Remember, when using technical analysis to chart a company's historical market performance, future performance is not a given. There are no genies in bottles locked away in the analyst programs. But we do know that the past often equals the future, and the more often an event occurred, the more likely it is to recur. And this is what stock speculation analysis counts on.
Some Stocks to Value Analyze for Yourself:
Bonterra Energy Ord Shs BNE: TSX
Computer Model Ord Shs CMG: TSX
AlarmForce Industries Ord Shs AF: TSX
Calian Tech Ord Shs CTY: TSX
Toromont Inds Ord Shs TIH: TSX
WaterFurnace Renewable Energy Ord Shs WFI: TSX
Happy Investing!
Shopping for deals in the stock market is something for the value investor. It involves finding stocks trading below fair value. Akin to discount shopping name brand items at outlet malls, value investing involves identifying stocks of solid companies, with a history of consistently growing revenue and earnings per share (EPS).
By comparing the current stock price to the company's historical fair value it can give you a place from which to compare potential investments. Stock brokerage analysis tools such as the Recognia Inc. research kit allows you to plot price movement of stocks along the fair value line.
Choose Stocks Priced Below Fair Value
Prices that currently fall below this line represent good value stocks as they are expected to eventually rise to where they should be. Many stocks tend to trade far above fair value--typically hyped stocks with lots of investor appeal, the "next big thing" stocks and tech stocks.
What Would Warren Buffett Say?
If you follow this blog, you'll see frequent reference to the great Buffett and buffettisms of trading. Buffett is a life long value investor who has made gazillions of dollars buying and holding value and growth-worthy stocks. A $10,000 investment in Buffett's Berkshire Hathaway in 1965 would be worth 30 million according to Investopedia.
Buy and Hold Value Stocks
Buffett screens companies with respect to consistency of performance with return on investment (net income/shareholder's equity); the avoidance of excess debt (debt/equity ration); high and increasing profit margins; age of the company on the market (at least 10 years public); companies with unique products that do not rely heavily on commodities (external influence); value--is the stock selling at a discount of at least 25%? Although it's difficult to determine a company's true intrinsic value, value analysis can provide a good source of value investment direction.
Not for the Active Day Trader
Value investors are Warren Buffet fans--the buy and hold gang. As long as a company continues to grow and earnings chime in at their expected marks, the stock will remain attractive to the value invester.
Remember, when using technical analysis to chart a company's historical market performance, future performance is not a given. There are no genies in bottles locked away in the analyst programs. But we do know that the past often equals the future, and the more often an event occurred, the more likely it is to recur. And this is what stock speculation analysis counts on.
Some Stocks to Value Analyze for Yourself:
Bonterra Energy Ord Shs BNE: TSX
Computer Model Ord Shs CMG: TSX
AlarmForce Industries Ord Shs AF: TSX
Calian Tech Ord Shs CTY: TSX
Toromont Inds Ord Shs TIH: TSX
WaterFurnace Renewable Energy Ord Shs WFI: TSX
Happy Investing!
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