How to Get Good at Value Investing

Despite its unprecedented performance over the past several quarters, the stock market still suffers from a reputation as being a gambling den which could swallow up your life savings with one wrong move.

In actuality, those who become students of the art and science of investing can realize consistent results and avoid the mistakes that lead lesser-educated investors to lose money.

For those looking to succeed in this business, learning the precepts of value investing is one of the best ways to achieve returns that others consider to be impossible.

This was the school of thought Warren Buffett used to make his fortune, and others have since followed in his footsteps, with many achieving gains that have far outstripped what they had made in the past.

The founders behind Kingstown Capital Management made value investing the cornerstone of their growth strategy years ago, and it has enabled them to earn massive amounts of revenue through the selection of companies that are solid, but are undervalued.

Want to do the same? In this post, we will share our top tips on how you can get good at value investing.

1) Buy companies who outperform their stock price

The stock market price of a company is a poor indicator of its actual value. Yet, this is what many average investors do – they buy stocks that are soaring, thinking it is a sign of a business that is well-put together, only to sell in a panic when it tanks.

This is what buying high and selling low is, and it costs people tons of money every day in the markets.
Instead, you should figure out its book value, which is determined by its cash flow, profits, revenue, the value of its assets, and other quantitative indicators.

By doing this, you can make an educated guess on what its future earnings will look like, which will make it easier to determine whether it is worth it to buy a specific company.

2) Only buy businesses that interest you

Those who are truly successful in investing are passionate when it comes to the types of companies in which they invest their capital.

Don’t just select a company based on its fundamentals – if you do, there’s a good chance its inner workings won’t interest you enough for you to pay attention to them, and any attempt to forecast its future will be half-hearted and ineffectual.

This will cause you to miss crucial information that could cost you money.

When you actually care about a company’s fortunes, knowing what is going on with it and its niche will be a much easier task.

3) Pay attention to how a company is managed

When researching a company, zero in on how management runs crucial aspects of the company.

Do they set aggressive goals and hit them more often than not? Do they actively take responsibility for screw ups, or are they constantly trying to pass the buck when something goes wrong?

To determine this, be sure to do your homework – it can be tough reading through stacks of financial reports and listening to hours of calls, but they will flesh out the aspects of a company that the numbers won’t show you.

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