The New Value Investing : How to Apply Behavioral Finance to Stock Valuation Techniques and Build a Winning Portfolio

The aim of value investing is to identify stocks that are undervalued and which can be expected to produce an above average return in the future. And the message from the history of investing is clear: if you successfully pursue a value investing strategy over the long term, you will earn an above average return on your portfolio. The goal of The New Value Investing is to help you identify undervalued stocks and teach you how to build your own successful value investing portfolio. Added to this, it is important to understand that value investing is inextricably linked with behavioral finance, and research advances in this area in recent years strengthen the case for value investing. The author explains how stock prices are determined by emotional crowds, how this leads to mispriced stocks and opportunities for the value investor, and how you can harness the insights of behavioral finance to improve your value investing approach. As you work through this book, the author shows how to follow the path from analysis of the economy, to the industry, to company financial statements, to creating a value range for a company's stock. You will learn: - How to remove emotion from your investment process. - The essential elements of portfolio construction. - What a value investor should observe in the wider economy and the market. - Where to find investment ideas. - How to read a company's financial statements from a value investing perspective. - Dividend valuation, earnings valuation and other valuation techniques. - How to undertake a full valuation analysis, with two complete worked examples of stock valuation for real-life companies. - What professional value investors at investment funds analyse and how they make their decisions. Value investing is within everyone's reach, so why doesn't everyone use it? The key is patience. The approach works over the long term if you stick with it and the result could be extra hundreds, thousands or millions in your portfolio at the end of your investment horizon. The aim of value investing is to identify stocks that are undervalued and which can be expected to produce an above average return in the future. And the message from the history of investing is clear: if you successfully pursue a value investing strategy over the long term, you will earn an above average return on your portfolio. The goal of The New Value Investing is to help you identify undervalued stocks and teach you how to build your own successful value investing portfolio. Added to this, it is important to understand that value investing is inextricably linked with behavioral finance, and research advances in this area in recent years strengthen the case for value investing. The author explains how stock prices are determined by emotional crowds, how this leads to mispriced stocks and opportunities for the value investor, and how you can harness the insights of behavioral finance to improve your value investing approach. As you work through this book, the author shows how to follow the path from analysis of the economy, to the industry, to company financial statements, to creating a value range for a company's stock. In this book, you will learn: how to remove emotion from your investment process; the essential elements of portfolio construction; what a value investor should observe in the wider economy and the market; where to find investment ideas; how to read a company's financial statements from a value investing perspective; dividend valuation, earnings valuation and other valuation techniques; how to undertake a full valuation analysis, with two complete worked examples of stock valuation for real-life companies; and what professional value investors at investment funds analyse and how they make their decisions. Value investing is within everyone's reach, so why doesn't everyone use it? The key is patience. The approach works over the long term if you stick with it and the result could be extra hundreds, thousands or millions in your portfolio at the end of your investment horizon Contents......Page 6 About the author......Page 8 Acknowledgements......Page 9 Preface......Page 11 The Impact of Emotion When Investing......Page 15 Basic Concepts in Emotional Control......Page 16 Sound Portfolio Decisions......Page 18 Company and Industry Diversification......Page 20 International Diversification......Page 22 Diversifying Larger Portfolios......Page 24 Trading Activity......Page 25 Portfolio Versus Individual Stock Performance......Page 27 Measuring Performance......Page 28 The Time Structure of Market Returns......Page 30 Deep Behavioral Currents......Page 32 Catching the Trade Winds of the Market......Page 35 The Universe of Ideas......Page 39 Your Broker or Your Barber or Your Brother......Page 40 Stock Screening......Page 41 Summary......Page 48 Value Investing versus Future Growth Investing......Page 49 Value Analysis......Page 50 Estimating a Value Range......Page 52 The Art of Selling......Page 56 Performance Expectations......Page 58 The Holding Period......Page 60 The Relationship Between the Market and the Economy......Page 62 The Business Cycle......Page 66 The Federal Deficit and Money......Page 73 Market-wide Valuations......Page 76 Summary......Page 78 The Company’s Flows......Page 79 The Balance Sheet......Page 84 Making Financial Statements Useful: Ratio Analysis......Page 90 Lies, Damn Lies and Financial Statements......Page 94 Summary......Page 95 The Idea Behind Valuation......Page 96 Dividend Valuation......Page 99 Earnings and Other Valuation Techniques......Page 105 Valuation Example 1......Page 108 Valuation Example 2......Page 122 Accounting Issues in Reported EPS......Page 131 Company 7 Example......Page 132 Mutual Fund Research......Page 136 Impact of Elements......Page 137 Putting it All Together......Page 139 Don’t Fall into the Popularity Trap......Page 140 Identifying stocks that are undervalued and which can be expected to produce an above average return in the future, this book teaches you how to build your own successful value investing portfolio. It explains how stock prices are determined by emotional crowds, how this leads to mispriced stocks and opportunities for the value investor.