Value Investing: Three Ways To Achieve Superior L/T ReturnsVW Staff
1. Informational advantage – unless you are analyzing microcaps, “better information” usually means insider information and will land you in jail.
2. Analytical advantage – being able to analyze information better, you can build better models.
3. Behavioral advantage – be more rational than average market participant
- Screens – 52 week lows, insider buying, magic formula (high return on capital + low P/E), etc…
- Watch lists – often when we do analysis we find companies we like but that are too expensive (no margin of safety), we determine what price valuation we want to own them at and put them on a watch list and wait. Actively seek to identify great businesses, value them and put them on a watch list.