Todd Capital Book Club: The Little Book on Value Investing — The hidden Win Win with Value Investing

When we bought Under Armour at roughly $50 per share we did it right before earnings dropped about six months ago.  Our shares were immediately chopped down by 25%.  We waited it out and maybe even threw some more money at it.  The next quarter Under Armour lost another 25%.  After doing some PE analysis I realized that at $50 per shares the stock was over valued.  However, at the new price of $20, Under Armour immediately became a value play.

The concept of value investing occurs when the intrinsic value is significantly less than the market value.  The gap between the two lines is your profit.  I know this, I have said this over and over again but what I realized when UA came back to even after we loaded up on more shares these last few months is that value investing creates a win win.  I realized this and it was then confirmed in the investment book I have decided to read this week.    f2bd3fc61f2e394830f558105d13bb91.jpg

For those of us who are investors and not traders you tend to fall into two camps, growth investors and value investors.  Growth investors buy whats hot in the streets, the bitcoins, the NVDA, googles, apples, Netflix and hope that the market will carry them higher.  Value investors seek to find the beaten down stocks and then buy them back up to the market price.  Right now I am reading The Little Book on Value Investing and I realized that there is a hidden Win Win in value investing.

The Win Win is that when you buy a value investment and it returns back to market price you win once, then when it runs up because of growth you get to win again.  This is why the guys like Warren Buffet and Ben Graham do so well.  They make money how the market makes money but they also get the premium that comes with buying a company when nobody wanted it.

The best time to buy stocks is when they are cheap.  The problem is that when they are cheap that is usually when there are a host of reasons not to buy them.  The best time to sell stocks is when they are expensive.  This is also the time when everyone is singing their praises.  The warning sign that you are stepping into dangerous waters is “everyone”.  If everyone is hyping up bitcoin, run.  If everyone is saying that the market is going to tank, buy buy buy.  The key to success as an investor is to be a contrarian.  You wont be popular but you will be rich.  If doing what it take to be rich was popular then everyone would be rich.  I want to encourage you to join our investment club.  We are doing some great things and we want you to be a part of it.  Email info@capitaltodd.com to join.

Be Great,

Todd Millionaire

 

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