I presented a webinar for Netwealth last week on value investing in small and mid cap stocks. Even after a couple of decades practising value investing, going back to basics gets me thinking about the fundamentals of what we do. And it helps, a lot.
The value of any financial security is the present value of the cashflows it is going to deliver to its owner.
That is the fundamental principle of value investing. How much am I going to get? When am I going to get it? How certain am I? Answer these three questions accurately, buy with an appropriate margin of safety and you don’t need to worry about anything else. The share price can go up down or sideways. It doesn’t even matter where the shares trade at all. The business you own is going to provide you with the return you require.
Despite knowing this, despite repeating it ad nauseam to investors and potential investors alike, I still get lured into letting share prices define our success. Sotheby’s (NYSE: BID) share price has doubled since we bought it, therefore we were right. Countrywide (LSE: CWD) is down 60% over the past few years, therefore we stuffed it up. Continue reading “B&C Speakers Shows What Makes a Real Successful Investment” →