A Different Kind of Checklist

Trying to mechanically reduce the process of discovering undervalued equities to a few value ratios such as P/B, P/E or EV/EBITDA can hardly translate into sustained outperformance of the broader market. If this was was the case machines would have replaced every single money manager long ago. At the same time prices for stocks screening favourably would be bid up and the opportunity would cease to exist. Unfortunately this means that a straight-forward checklist, purely based on a bunch of financial ratios, does not help at all.

To define the checklist that can be of help to outperform the broader markets it is necessary to first outline the playing field  and from there answer the question of what has to be done to outperform the market.

I believe the playing-field looks like this:

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Strategy Update

I felt the strategy section was overdue for an update to give it a little more structure and break it down to what really matters to value invest successfully. Hence this blogpost will be pinned here to give an overview on how I try to invest my funds.

For me as a value investor the most important imperative is to reduce uncertainty when valuing companies. However, widely used valuation techniques (while theoretically justified) such as the discounted-cash-flow method, usually involve a lot of guessing and forecasting into very distant points of time in the future. Continue reading

Is our Understanding of Risk Seriously Flawed?

How is Risk Traditionally Measured?

Are we equipped with a flawed understanding of risk? In Business Schools all over the world students are drilled to think of risk as volatility measured by standard deviation σ, when investing in financial securities. As inputs to calculate the standard deviation (Stdev) we are taught to rely on observable asset prices. Such data is easy to gather e.g. historical equity prices are downloadable at yahoo-finance over time frames sometimes as long as 50 years. We then use this data to calculate the Stdev of e.g. our portfolios or single equity positions. A low standard deviation indicates that returns of the stock are usually very close to their mean. From this we infer that at a given day  in the future there is only little chance for highly negative or highly positive returns. Continue reading

Teil III: Bewertung Intel Corp.

Teil III der Serie Value Investing the Columbia Way möchte in einem etwas anderen, vielleicht eingängigerem Format präsentieren. Wie auch schon die vorigen Artikel basiert auch dieser gänzlich auf dem Buch Value Investing, From Graham to Buffett and Beyond von Greenwald et al. (2001). Nachdem Ich in meinem letzten Blogbeitrag die Bewertung der Assets zum Liquidationswert vorgestellt habe möchte Ich mich in diesem Artikel nun mit der Bewertung zum Reproduktionswert befassen. Um die Sache ein wenig anschaulicher zu gestalten werde Ich dies an einem konkreten Beispiel tun und mich an einer aktuellen Bewertung von Intel versuchen. Continue reading

Teil II: Valuation of Assets, Liquidationswert

Im zweiten Teil der Serie Value Investing the Columbia-Way basierend auf dem Buch Value Investing – From Graham to Buffett and Beyond von Greenwald et al. (2001) möchte Ich mich genauer genauer mit der Bewertung der Assets im Liquidationsfall befassen. Die Bewertung der Assets, wie bereits im vorigen Beitrag beschrieben, ist die sicherste Variante zur Aktienbewertung, da hierfür keine Schätzungen Continue reading

Teil I: Value Investing the Columbia-Way

Seit meinem letzten Artikel ist einige Zeit vergangen, schuld daran der Klausuren-Marathon an der Uni. Die nun folgende entspanntere Zeit für Studenten möchte Ich unter anderem dazu nutzen den Columbia-Way des Value-Investings vorzustellen und anzuwenden.  Als Grundlage hierfür dient das Buch Value Investing – From Graham to Buffett and Beyond von unter anderem Bruce Greenwald (2001).  Continue reading