Mastering Value Investing In 4 Weeks
Module 1 – Compound Interest Is The Eighth Wonder Of The World
The average stock market return is about 10% per year for nearly the last century. The Rule of 72 says you can double your capital every 7 years if you can achieve 10% ROI per annum. Achieving more than 10% is possible through the key principles of Value Investing first introduced by Ben Graham and enhanced and practised to great success by the famous Warren Buffett, one of the richest people in the world. The module covers why it is critical to start investing as early as possible to compound your wealth and the key value investing principles.
Module 2 – Introduction To Financial Statements
Knowing how to read the financial statements of companies is important to understand the performance of any company you intend to invest in. Sweat not if the language is new to you as the 3 key financial statements namely Income Statement, Cash Flow Statement and Balance Sheet are simplified and explained. You absolutely do not need a finance background as this module will equip you with a practical knowledge.
Module 3 – Buying Stocks As If They Are Businesses
Many people buy stocks based on “stock tips” by brokers, friends or analysts. The first step towards investment success should be to view buying a stock as if you are investing in an actual business. What due diligence would you have done? You will probably want to know how profitable the company is, how it attracts and retains customers, how good the products and services are and how it competes with other players. This module trains you to start asking the right questions.
Module 4 – What To Invest
There are thousands of companies listed on exchanges all over the world, and you are not short of companies to be selective of what to invest. A retail investor only needs a maximum of 10 good companies in the portfolio. The best principle to adopt is to stick to what you know when selecting the company or the industry to invest in, a concept known as Circle Of Competence which the module focuses on.
Module 5 – Evaluation Of Businesses, Qualitatively
This module delves into the evaluation of businesses in two key aspects, the management quality and the economic moat. The management of the company drives the strategies of the business and ensures the company is run optimally, so it is important to assess whether a company is led by a good management team. A business needs to thrive against competition, knowing whether a company possesses a durable economic moat (or competitive advantage) allows you a quick assessment whether you have picked a potential winner.
Module 6 – Evaluation Of Businesses, Quantitatively
This module brings in the numbers, the financial metrics. A business exists to earn profits, and this should be done without extended leverage. A company’s stock price appreciates in the long term when the profits continue to grow. The PhD (Profitability, financial health, growth Driver) fundamental analysis methodology is used to do quantitative analysis systematically and derive at a conclusion whether a particular company is financially sound.
Module 7 – How Much To Pay For a Stock
Modules 5 and 6 allow you to gauge if a company is a wonderful company that you should invest in. However, even for a wonderful company, you must pay the right price for it. For any company, there is what is called an intrinsic value which is theoretically all the future cash flows that the company is going to generate. The module covers valuation techniques namely the relative PE and discounted cashflow (DCF). Concept of Margin Of Safety (MOS) is included.
Module 8 – Investment Key Success Factors
This module summarizes the important concepts and links materials covered together. In addition, successful investment requires a long-term mindset and an investor must be psychologically and mentally prepared to deal with shorter-term price fluctuations which cause both greed and fear. One should tap on opportunities offered by Mr Market when certain stocks are hugely undervalued compared to their intrinsic values.