Value Investing FAQs

Q: What is your investment process and criteria for investments?

A: I am a value investor. I  look for high-quality companies that are undervalued, and companies with strong balance sheets and low price to earnings (P/E) ratios. I  use the criteria spelled out by the father of value investing,  Benjamin Graham. Volatility is my ally. I buy when a good company is  down in price and sell when the company’s stock price is bid up to  unreasonable heights. I am looking to hold a stock for a period of  one to two years or longer. Typically I find companies with  short-term problems, but with excellent long-term outlooks. Benjamin  Graham’s advice still holds true: “Investors do not make mistakes,  or bad mistakes, in buying good stocks at fair prices.”
 
Investing in value stocks is quite different from growth or momentum  investing. We look for stocks at bargain price, so price charts are  of little use. We do not recommend selling a stock because the price  is declining. If a stock is a bargain when purchased, it is a better  bargain at a lower price--not a candidate for a quick sale at a  loss. And we don’t try to time the market. We would much rather  focus on buying low, holding long term, and selling high.

Q: If I buy a stock on the ex-dividend date, will I receive the dividend for that quarter?

A: If you buy a stock on the ex-dividend date, you will not receive the dividend for that quarter. However, if you buy on the day before the ex-dividend date, you will receive the dividend.

Q: What gives you an edge over other investment experts?

A: Several factors give me an edge. I look for investment opportunities  in:
  • Leading companies that are less volatile
  • Companies with low debt that are unaffected by the credit crunch
  • Companies whose stocks are undervalued and are less likely to  decline
  • Companies paying adequate dividends to boost returns during a longer  term holding period.

My  biggest edge is my Benjamin Graham-based method of calculating an  optimum buy price and sell price for each stock in my database. I call my buy and sell prices “Maximum Buy Price” and “Minimum Sell  Price.” I have taken the guesswork out of when to buy and when to  sell. Buy when a quality company’s stock price declines to my  Maximum Buy Price and hold until your stock reaches my Minimum Sell  Price.

Q: What are your short-term and longer-term views of the markets?

A: I try not to get caught up in market or sector forecasts. My  objective is to buy stocks that are undervalued. Your goal should be  to consistently buy leading companies at reasonable valuations. Then  your long-term objectives will be met, despite wild fluctuations in  the stock market. One of my favorite quotes from Warren Buffett is:  “Look at market fluctuations as your friend rather than your enemy;  profit from the folly rather than participate in it.”

Q: What sectors do you think offer the most opportunities to profit  today?

A: I measure opportunity in terms of revenue and earnings growth  forecast for the next year or two. I recommend broad diversification  with a focus on the consumer staples, health care, energy, and  technology sectors. Other sectors, such as banks and homebuilders,  are clearly undervalued, but forecast revenues are cloudy at best.
 

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