20140512 viir special report 5 questions

8/11/2019 20140512 VIIR Special Report 5 Questions

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www.valueinvestingindiareport.com 1

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The Five Questions You Must Answer if You Want

to Be a Value Investor

So, you want to be a value investor? Value investing more than any other

type of investing is about the ability to bear pain. Are you confused? Let

me share with you a quote from legendary value investor Jean-Marie

Eveillard:

Most people arent cut out for value investing, because human

nature shrinks from pain. - Jean-Marie Eveillard, First Eagle Funds

Markets are for the most part efficient. If a stock is trading at a large

discount to its intrinsic value, investors are concerned about a threat to

the underlying business. It could be a new competitor has just entered

the industry, new government regulation or a recession may be looming

on the horizon. For a stock to trade at a meaningful discount there is

something identifiably wrong.

The key to value investing is to know when a problem is fixable and

when its not. When you invest in a company simply because its cheap

and it cant fix the problem, youve just entered into a value trap. Inmany instances the dividing line between a value trap and an excellent

investment is quite thin.

Going against the grain is clearly not for everyone - and it doesnt

tend to help you in your social life - but to make the really large

money in investing, you have to have the guts to make the bets that

everyone else is afraid to make. - Carlo Cannell, Cannell Capital

When you initially make an investment in a depressed stock, you wontknow for a very long time whether you made a good decision.

Additionally, you wont have the support of the financial media, your

broker or your friends when making such investments. By definition

value investments are out of favor. Very few individuals have the

ability to remain objective and to not follow the investing herd.

Special Report:

May 12, 2014Version 1.0

The Five Questions You Must

Answer if You Want to Be a

Value Investor:

1) Do I have the emotional ability

to avoid the latest market fads

and focus on my investment

methodology even when its notworking?

2) Am I prepared to do the vast

amount of screening and

research necessary to pick

winning stocks?

3) Am I strong enough, financially

and emotionally, to follow a

focused portfolio strategy?

4) Am I capable of determining the

intrinsic value of a stock with ahigh degree of accuracy?

5) Am I willing to take a long-term

view for bigger gains in the

future?
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Tweedy, Browne & Company, a US based asset management firm found that successful value investors

underperform their benchmark from 25-40% of the time. It can be a lonely feeling watching your portfolio

underperform, while the broader market is rallying. It takes a high level of conviction to stick with a value

investing methodology in the short-term to ensure you outperform in the long-term.

Thus, value investing requires great patience and the ability to take a differentiated view from the market.

Most investors either dont have the patience to be successful or the ability to be a contrarian. If you dont

have either ability, I can guarantee you it will be both painful and difficult to be successful as a value

investor.

Value Investing Is Hard. So, Why Pursue It?

Fundamentally, value investing is based on an extremely simple principle: exploit the discrepancies

between the valueof a business theprice of ownership for that business in the market. Yes, thats it. All the

volumes written about value investing boil down to the preceding principle. If youre thinking thats an

obvious statement, you would be correct. However, dont confuse elegant simplicity with being simple. The

trick is not in understanding the principle its in the execution.

Ive already laid out for you why value investing is hard. Well now explore why anyone would want to be

a value investor in the first place. The answer again is straightforward. Value investors as a group have

demonstrably shown superior investment returns across time, geography and stock market cycles.

Ibbotson Associates and the Center for Research in Security Prices conducted a truly comprehensive study

on the performance of growth vs value stocks and published the results in a white paper titled A

Comprehensive Set of Growth and Value Data. The study definitively showed that value beats both growth and

the overall market over long periods of time.

From 1968 - 2002, a portfolio investing in US growth stocks realized an annualized return of 8.8%. Over the

same period, a portfolio invested in US value stocks realized an annualized return of 11.0%.

If the difference doesnt seem like much, consider that in just 10 years, your brokerage account balance

would be more than 22% larger by investing in value stocks than growth stocks. And as you keep investing,

the gap becomes even larger.

If you had just invested $1,000 in a portfolio of value stocks in 1968 it would have grown to $34,630 by 2002.If you had invested the same amount in a portfolio of growth stocks over the same period, it would have

grown to only $17,520. Your value portfolio would have been 98% larger than your growth portfolio at

the end of the period studied.


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Figure 1: Value of $1,000 invested in Growth vs. Value stocks from 1968-2002

Is Value Investing for You?Value investing in my opinion provides the best opportunity to compound your wealth over the long-term.

If you value financial freedom, value investing is probably the most effective method you can utilize to

achieve your goal. If youre still not sure whether you could be a successful value investor, answering the

following five questions will help clarify whether its right for you.

1. Do I have the emotional ability to avoid the latest market fads and focus on my investment

methodology even when its not working?

There have been numerous studies that show value investing works over time. However, the sad reality is

that most individual value investors fail to outperform the overall market. The main reason for this failureis not related to intelligence. After all, Buffett himself has famously stated:

You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the

guy with 130 IQ."Warren Buffett, Berkshire Hathaway

I think the biggest mistake that most investors make is that they are unable to be inactive. Value investing

more than any other type of investing requires patience, which is in short supply these days. No other form

of investing requires you to sit and wait indefinitely for the right opportunity to show up. The bigger issue

is that while youre waiting to find the right opportunity your friends, cousins and uncles are all talking

about the latest killing theyve made in whatever is the latest fad in the market.

Each month I religiously get a call from my broker hyping up the latest fad in the Indian equity market. I

actually track many of his recommendations on a spreadsheet and most of the time they are money losing

propositions. I actually shared the spreadsheet with him and his only response was that he can only advise


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but I must decide. Not exactly confidence inspiring. Thats why I always emphasize doing your own

research or utilizing a service likePremium Access.

This is only one example of the inefficiencies and irrational behavior that stalks the Indian market. I dont

care how many neat formulas and equations that academics derive to prove the existence of market

efficiency. The Indian market is most definitely not efficient. Primarily because the investors that make up

the market are not rational decision making robots. Theyre humans driven by greed and fear.

Thats why you need to follow an investing approach that implicitly benefits from this irrationality. Price is

not the equivalent of value. Bargains will undoubtedly appear in the form of high quality businesses trading

at discounted prices, when market participants start panic selling. Its not a question of if they will panic,

only when they will panic.

The problem for most investors is having the courage to take action when a stock or the market as a whole

is trading at fire sale prices. I wish that I could say that I was buying hand over fist during the 2008 financial

crisis, but I wasnt. I was too scared. It has cost me in the long-run.

The problem was that I wasnt fully fledged value investor at that point in time. I was still brain washed by

my pricey MBA education to believe in rational and efficient markets. Only my personal investing

experience has convinced me that value investing works because markets are irrational, fear driven and

rarely if ever at equilibrium. Fortunately, Ive now been extremely successful with value investing and now

have both the knowledge and confidence to avoid the mistake I made in 2008.

The key for you to make money is to have the emotional maturity to control your fear. Its not easy and

many people are not capable of doing it. I dont care how analytical or rational you think you are. When

youre watching your portfolio fall by 50% in the matter of a few months no amount of analysis is going to

keep your fear in control.

Only having gone through a cycle or two will you have the experience and emotional maturity to buy when

there is blood in the streets. Its one thing to acknowledge that being a contrarian is the only way to achieve

out-sized returns in the market but putting it into practice is where the rubber hits the road.

2. Am I prepared to do the vast amount of screening and research necessary to pick winning

stocks?
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This sounds obvious, but perhaps the most common mistake that investors make is failing to

thoroughly investigate the stocks they purchase. Unless you know the business inside and out, you

shouldnt buy the stock.1

Identifying good value investments is a four part process:

1) Screening2) Accounting

3) Reading annual reports

4) Valuation

Finding good value stocks is a labor intensive process. While investors will differ on the main tools that they

use, the basics are always the same. First, you need to narrow down the thousands of listed companies

available in a particular market into a target list that you want to analyze and research further. For some

investors this simply means reading the newspaper daily and learning more about businesses. Buffett

famously uses the Value Line Surveys. The majority of professional investment managers use either

Bloomberg or FactSet, which both cost thousands of dollars a year. Regardless of the software you use, you

need to develop a systematic way of screening potential investment ideas.

Also, you need to follow this process religiously. I personally review my own proprietary screens at the

beginning of every week. Ive been following this same process for years. I can tell you from my own

personal success its not about having the most sophisticated quantitative screening model, rather its the

consistency of continually screening that will produce big results.

Once youve identified a potential investment candidate through your screening process, you dig into thefinancial statements. Without understanding basic accounting youll have no way of truly understanding

the economics of a business. You dont need to be a Chartered Accountant, but you do need to understand

intuitively how all three accounting statements are compiled and how theyre connected. If youre not

willing to put in the work and truly analyze financial statements, youll never have the ability to stick with

a position for the long-term. Youll be quick to sell your position because you dont fully understand the

underlying economics of the business.

After youve come up to speed on accounting, you need to start reading annual reports. I cant emphasize

enough that if you read annual reports youll be ahead of 99% of investors. Most investors dont take thetime or the effort to read through annual reports, which is a mistake. Warren Buffett spends the majority of

his day reading annual reports.

1Dorsey, P. (2004). The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the

Market [Kindle version]. Retrieved from Amazon.com.


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Knowledge much like money compounds over time. The best way to learn about a new industry and to

increase your circle of competence is to read the annual reports of the three leading companies in that

particular industry. When reading annual reports you need to look for three things:

1) How the company uses excess cash

2) What metrics the company uses to measure success

3) How the CEO/Chairman explains the company differentiates its products and strategy

At the Value Investing India Report (VIIR) we only invest in high quality businesses that have a sustainable

competitive moat and are conservatively financed. If you focus on these types of companies, they will

undoubtedly be excellent cash generation machines. How management uses that extra cash flow will

ultimately determine your results as a shareholder. If management uses the excess cash to grow their empire

and acquire new businesses without taking into consideration profitability, youll be on the losing end as a

shareholder. The goal is to find management teams that talk about returning cash to shareholders. You want

to read about companies that have a defined dividend or share buyback policy. If you can identify

management teams who are focused on returning cash to shareholders, youve virtually guaranteed

yourself solid returns.

Annual reports will also disclose the metrics that management uses to measure success. Again you want to

find businesses run by managers that emphasize shareholder friendly metrics such as Return on Equity or

profitability. You want to avoid management teams that are solely focused on growth and pro forma

earnings2.

Also, you want to make sure management is aligned with your interests as a shareholder. Charlie Munger

is a big believer in incentives. Always make sure that managements incentives are aligned with yours. If

you see over-sized stock option packages, its a clear danger sign.

Finally, the last thing you want to identify in annual reports is how management will broaden or increase a

companys moat. You want to find management teams that will be able to define a unique strategy that will

build on the companys existing competitive advantage. Moats as most things in life are never static. They

are either widening or narrowing. You want to stick with companies that have management teams focused

on widening a companys moat.

If it sounds like a lot of work, you would be correct. It is a lot of work. Thats why 99% of investors dont

read annual reports. They would rather turn on the TV or read the latest best-selling novel. To be successful

as a value investor doesnt require a high IQ, but it does require a lot of work. If youre not prepared todo

2Pro forma earnings are earnings presented by management teams that dont conform to GAAP (Generally Accepted

Accounting Principles). These earnings are usually provided by management teams to paint the company in a better

light.


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the homework, I would recommend finding a good newsletter written by an investor who has a value

focused methodology or at a minimum investing your funds in a low cost index fund.

3. Am I strong enough, financially and emotionally, to follow a focused portfolio strategy?

We wanted to really drive home the point that, you first have to pick the stocks and secondly, youve

got to put them together in a portfolio. The thing that really kind of took me aback after I wrote the

Warren Buffett Way was that it seemed like everyone had the Warren Buffett conversation down: We

only buy the right businesses, we want good managers, were looking for high returns on capital, good

profit margins, cash flow and earnings, and we always buy them for less than theyreworth. Thats the

Warren Buffett way. Then you find out about the portfolio they manage; its 140 stocks, [a] turnover

ratio of 90%. They got the stock selection part down, but not the portfolio management aspect. That was

part of the driving force in writing the book.3

As the quote above from Robert Hagstrom highlights, many investors think that simply selecting the rightstocks is enough for investment success. Thats just 50% of the process. The remaining half is determining

position sizing and creating a portfolio. When you invest in a company youre not simply making an

investment decision in isolation. You need to weigh that decision in terms of the other alternatives in your

portfolio. You need to answer the following questions: Does it make more sense to add to a position

currently in your portfolio? Should you sell a position before adding a new one? And most importantly,

what is the correct position size?

I firmly believe that in order to achieve market beating performance, you need to take concentrated positions

in a handful of stocks. This focused strategy will pay-off over time but at the expense of near-term volatility.If you cant handle the short-term ups and downs, you wont have the staying power to stick with your

positions. At the first sign of a market correction, youll be selling out of your positions at a loss.

I think most investors intuitively understand the type of stocks that you want to buy and hold for the long-

term. Where they fail miserably is the actual creation of a portfolio of stocks. Most value investing bloggers

that Ive read, focus on finding new stocks and then leave you hanging on the portfolio construction part.

In all fairness its not completely their fault. They havent had to manage money professionally.

At most professional asset management firms, the research process is undertaken by analysts and the

portfolio construction by portfolio managers. The primary role of the portfolio manager is to determine the

number of stocks and size of each position within the portfolio. Most investors are familiar with the analysis

of stocks but are simply out of their depth when it comes to portfolio construction.

3Wettlaufer, D. (1999, May 10). Interview with Legg Mason Focus Trust Manager Robert G. Hagstrom. Retrieved from

http://www.fool.com.


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If you actually read the earliest Berkshire Hathaway annual reports youll realize that Buffett never owned

more than 20 stocks. In comparison, the average mutual fund has between 100-200 positions. Which means

that the average position size comprises 0.5% to 1.0% of the overall portfolio. Even if you find a stock that

doubles it will only mean a 1% increase in the total value of the portfolio, at best.

Most mutual funds will never be able to outperform the market because theyre not making concentrated

bets. If youre looking for average market performance then investing in a mutual fund is not a bad option.

However, if you factor in a 2-3% expense ratio as a percentage of assets under management, its almost

impossible for an active mutual fund manager to outperform the market.

In my view, a rational investor has two options when it comes to investing. 1) Invest in a low-cost index

fund, with expense ratios in the 40-50 bps range. 2) Invest on your own using a value investing

methodology.

You probably already know this but I would choose option 2. I dont want to settle for market performance,

because I think its possible to massively outperform the market using a focused value investing process.

The one caveat that I must add is that a focused portfolio will both amplify your potential rewards and

losses. If youre not a good stock-picker a focused investment methodology will do more damage to your

portfolio than good. You must be confident in your investment process and have the right mindset.

We not only provide investment recommendations to our Premium Access subscribers, but also a

comprehensive asset allocation plan. We tell you exactly how big a position to take and are constantly

monitoring our position sizing. In fact, I use the same exact process that my portfolio managers taught me

at my old firm, where we managed $1 billion in assets. Youll no longer be guessing about how big a position

to take, but will be making calculated bets on only the best and most attractive investment opportunities

that we come across.

The only way to develop the right mindset is to create an investment process in which you have complete

faith. After going through one or two cycles youll have the confidence to realize that youre investment

decisions were sound and that things will work out in the long-run.

The only surefire way to develop this confidence is through experience. However, it always helps to have

another investor with whom you can share ideas and obtain solace during market storms. Ive been through

enough cycles to know that value investing works, but it takes a huge amount of patience. I try to be the

stabilizing factor for my subscribers, who may not have the same amount of experience in the market as I

do.

In fact, I think one of the biggest benefits of being a subscriber is that youre continually fed a steady diet of

tips and strategies about value investing. In small steps you increasingly become more confident as a value
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investor. Small steps in the right direction eventually lead to big changes. When youre surrounding

yourself with other value investors you cant help but take a longer-term view and make better investment

decisions.

4. Am I capable of determining the intrinsic value of a stock with a high degree of accuracy?

Buffett recognizes that he is neither richer nor poorer because of the markets short-term fluctuations in

price, since his holding period is longer-term. Whereas most individuals cannot endure the discomfort

associated with declining stock prices, Buffett is not unnerved, because he believes that he can do a better

job than the market in valuing a company. Buffett figures that if you cant do a better job as well, you

dont belong in the game. Its like poker, he explains - if you have been in the game for a while and dont

know who the patsy is, youre the patsy.4

An essential part of value investing is having the right skill-set to determine the intrinsic value of a stock.

Even if you have the right mindset it doesnt mean much if you dont have the technical skills to accuratelydetermine the value of a stock. There is only one primary method that should be used to value a stock:

discounted cash flow analysis.

If you dont know how much a stock is worth, how can you possibly know youre buying it at a discount?

While many investors like to focus on simple valuation metrics such as P/E and P/B thats not enough to

make accurate investing decisions. Multiples are like a shorthand for valuation. Theyreextremely valuable

for doing a short cursory overview analysis but I would never commit my own capital based on solely a P/E

multiple and neither should you.

A fundamental rule in finance is that any asset, whether its a bond, stock or even a mortgage backed

security is valued exactly the same way. By discounting its cash flows at an appropriate discount rate. Thus,

there is an underlying consistency to modern finance which simplifies many complex securities. Even if you

dont understand how a mortgage backed security is created, you can still value itby determining its cash

flows over its life and then discounting them back to the present. For some securities calculating cash flow

is easy. A bond, for example, has explicit interest payments and your principal is returned at the maturity

date. Thus, valuing a bond is usually the first security most business students are taught to value.

The same principles apply to valuing stocks. However, the difficulty lies in accurately measuring andcalculating cash flows. First, an investor must calculate free cash flow, which can be simplified to mean

operating cash flow less capital expenditures. The problem that most investors face is that they dont know

how to forecast these cash flows into the future. What growth rates do you assume? How much capital

expenditure is appropriate?

4Hagstrom, R. (2014). The Warren Buffett Way, Third Edition [Kindle version]. Retrieved from Amazon.com.


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Unfortunately, there is no black & white answer. All valuation is a grey area. It takes years of practice before

you can accurately value a stock. Even if youre proficient in discounted cash flow analysis, the use of

multiple assumptions in your valuation can mean your estimate of per share value is way-off from reality.

Discounted cash flow analysis requires the use of a number of assumptions ranging from the appropriate

discount rate to the growth rate in FCF (free cash flow) into perpetuity. I can guarantee that no two investors

will ever come up with the same exact valuation for a stock because of the myriad amount of assumptions

used.

DCF is a powerful tool, but it also has its limitations. DCF is typically more accurate for high quality

businesses with stable operating earnings. If youre projecting cash flows into perpetuity, only a high quality

business with a strong competitive moat has a high likelihood of realizing those cash flows. Despite its

limitations, DCF is still an invaluable tool for a value investor.

You can project out cash flows with great accuracy over a 3-5 year period. If you find a stock that is

overvalued you can vary multiple assumptions to determine how the stock is being valued by the market.

Most importantly, you can identify stocks that have a limited chance of actually living up to the high

expectations being placed on them. DCF not only can help you identify winners but also avoid losers.

Discounted cash flow analysis is not difficult to learn. If youre a serious investor the best place to start is

with Pat Dorseys Five Rules for Successful Stock Investing. If you finish that book and are looking for a deeper

dive, than McKinseys handbook called Valuationshould be next on your reading list. Ive written a review

of the book, which you can readhere.

Of course, by subscribing to the Value Investing India Report you can be confident that all our investment

ideas are backed by fully integrated discounted cash flow models with projected income statements, balance

sheets and cash flow statements. More importantly, we constantly update our price targets and financial

models based on quarterly results. Trust me, its a full-time job. By subscribing to ourPremium Access

service you can benefit from our high quality financial models, without having to do it yourself.

Clearly, valuation is not easy but its required if you want to succeed as a value investor. Make sure youre

doing it correctly. If youre not sure find a teacher or let a professional do it on your behalf. If youre a high

net worth investor its unlikely that you do your own tax returns. You most likely hire a professional

Chartered Accountant to file your returns. Leveraging the knowledge and research of a dedicated

investment professional is no different than hiring an accountant. Youll achieve better results and save

time. If youre not willing to put in the effort, I highly recommend that you use a service like ours.

5. Am I willing to take a long-term view for bigger gains in the future?

Your investment success is predicated on your ability to save money on a regular basis and to find a

small handful of wonderful investment opportunities throughout your lifetime. If in your search for an
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US was headed for a double-dip recession. The entire Indian IT sector, which derives a large portion of its

revenue from US companies, was trading at a bargain price.

I didnt worry about the macro outlook for the US. I knew Hexaware was a good business that was trading

at a large discount to its intrinsic value. By October, 2013 when I recommended selling the stock it was

trading in the INR 130 range and produced a 62% return for my subscribers. When I recommended the stock

I didnt know how long it would take for the shares to reflect the underlying intrinsic value. The key is that

I was willing to remain patient. If youre buying undervalued shares in high quality companies, its very

likely that they are facing some near-term problems. In the case of Hexaware brokers and so called analysts

were down on the entire sector because of macro concerns. If there is one thing that you take away from

this report it should be that nobody has a clue how to predict broad macroeconomic trends. John Kenneth

Galbraith said it best:

The only function of economic forecasting is to make astrology look respectable.John Kenneth

Galbraith

You should be prepared to hold your positions indefinitely as long as the underlying business is performing

well. Your returns over time will essentially match the return on equity (ROE) the business is producing.

Companies create value by generating future cash flows at rates of return that exceed their cost of capital.

If you find a company that consistently generates returns above its cost of capital you want to hold on to it

for the long-term.

Summary

If you want to be a successful value investor you need answer yesto all five of the following questions:

1) Do I have the emotional ability to avoid the latest market fads and focus on my investment

methodology even when its not working?

2) Am I prepared to do the vast amount of screening and research necessary to pick winning stocks?

3) Am I strong enough, financially and emotionally, to follow a focused portfolio strategy?

4) Am I capable of determining intrinsic value with a high degree of accuracy?

5) Am I willing to take a long-term view for bigger gains in the future?

You might be able to answer one or two questions definitively and find yourself unsure about the remaining

questions. In the end, only you can determine whether value investing is right for you. Value investing is

not an easy discipline. But its definitely a worthwhile pursuit for those individuals dedicated to it.

The key to being a successful value investor is to be patient and to stick with your strategy over the long-

term. Most novice investors make the cardinal mistake of giving up on value investing when their portfolio

starts underperforming the broader market. Its all too human to start extrapolating recent results into the

future. If you have the capacity to handle the ups and downs of a value investing investment process, you

will greatly enhance your chance of long-term success.


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Finding great investments is difficult. Yes, having a value investing based process will help you to identify

potential investment ideas but it still requires dedicated effort and hard work. Modern screening tools

allows you to narrow down the universe of stocks that you are looking for, but it doesnt replace the actual

analysis and fundamental research done on a company. If youre prepared to do your homework, you will

already be ahead of 99% of other investors.

If you want to substantially outperform the market over a 10-20 year period, you must have the conviction

to manage a focused portfolio. Alice Schroeder the author of The Snowball: Warren Buffett and the Business of

Life, stated recently that the biggest lesson she learned about investing from Warren Buffett was the

following:

Warren believes in concentrating your bets, up to 15-20% of your assets, if you have high conviction.

As he put it, why invest in your tenth best idea. So, I have a very concentrated portfolio now.6

Managing a focused portfolio has the capacity to either dramatically improve or worsen your returns.

Clearly, a focused strategy is risky if youre not an excellent stock picker. Despite the increased risk, youmust concentrate if you expect to outperform your benchmark index. The basic question you must ask

yourself is whether you have the drive, conviction and skill to be a successful focus investor. As legendary

value investor Howard Marks states, you have to dare to be great.

Warren Buffett is quite clear in his belief that if you dont have the skills to accurately determine the intrinsic

value of a stock, you would be better off putting your hard earned capital into an index fund. The logic

behind this statement is simple. If you dont know how much something is worth, how can you possibly

know the right price to pay for it? The intrinsic value of a stock is simply the present value of its cash flows,

discounted back to the present. The entire process of calculating intrinsic value is called a discounted cashflow analysis (DCF). Learning how to do a DCF valuation can be difficult for novice investors. For those

willing to learn this skill, the payoff will be an increased likelihood of achieving market beating returns.

Only by assessing cash flows can you come up with an independent assessment of what a stock is worth

without relying on metrics related to price such as P/E and P/B. Knowing the intrinsic value of a stock

provides you with the information necessary to determine whether in fact youre getting a bargain.

Most value investors underperform their benchmark for short periods of time, but will outperform over the

long haul, meaning years and decades. Its very easy to get discouraged and switch to a different investing

strategy when your portfolio is going through a period of underperformance relative to the benchmark.Ironically, the bulk of the underperformance will come late in bull markets when valuations are stretched

and momentum has taken over. Your friends, colleagues and family members will all be giddy with their

new found stock market wealth and will be more than happy to share the news with you. When the media,

brokerage analysts and popular opinion goes against you, it will be exceptionally difficult to stick to your

value knitting. Empirical research done by investment management firm Tweedy, Browne & Company,

6Schroeder, A. (2014, May 09). Hi, I'm Alice Schroeder, author of The Snowball: Warren Buffett and the Business of Life.

Looking forward to your questions. Retrieved from http://www.reddit.com.


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showed that successful value investors can underperform their respective benchmark 25-40% of the time. If

you want to be successful as a value investor you must be able to take the long view in terms of both your

investments and performance of your portfolio.

As you can tell, being a value investor is not easy by any means but it is rewarding both from a financial

and intellectual perspective. The golden rule for all value investors remains: Focus on the long-term and

stick with your plan.

What should you do if you believe in value investing as an investment methodology but lack the time to

focus on it? There are basically two solutions. The first is to find a PMS or mutual fund manager that has a

value investing based outlook and invest with them. The problem as I highlighted earlier is that its difficult

for mutual fund managers to outperform their benchmark after fees are taken into account. Yes, even value

oriented managers have a tough time outperforming the market.

The second solution for individuals interested in managing their own portfolio but lacking the time to do

deep fundamental research is to subscribe to a value oriented investment advisory service. However, the

main problem remains that the vast majority of investment newsletters provide no track record and have

had exceptionally poor returns. In many instances the publisher is more concerned about selling

subscriptions than making accurate stock recommendations.

We solve both problems via ourPremium Accessproduct by publishing our track record in comparison to

the Nifty index on a quarterly basis. Furthermore, we keep an archive of our entire history of stock

recommendations available to all subscribers. Thus, you can easily audit our track record and verify for

yourself how successful weve been in growing our customers portfolios.

If youre just starting on your value investing journey and have experienced poor performance due to stock

selection, its most likely that you havent yet answered all fivekey questions, affirmatively. Additionally,

you probably havent been taught the ability to do valuation and fundamental analysis correctly. Value

investing like most highly developed skills must be learned under an apprenticeship model. If youve

pursued a self-taught approach, youve most likely picked up bad habits. If youre ready to start learning

how to value invest using a systematic and proven method developed over years of experience, the Value

Investing India ReportPremium Accessservice is right for you.

To get started on improving your skills as a value investor and implement a focused value approach in your

portfolio click on the link below.

Value Investing India Report Premium Access
http://www.valueinvestingindiareport.com/http://www.valueinvestingindiareport.com/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/subscribe-6/http://www.valueinvestingindiareport.com/


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Important Notice

No Investment Advice

This newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such

an offer or solicitation would be illegal. This document is provided for informational purposes only. Nothing contained

in this document constitutes investment, legal, tax or other advice or guidance and should be disregarded when

considering or making investment decisions. In preparing this document, VIIR did not take into account the

investment objectives, financial situation and particular needs of any particular person. Accordingly, before acting on

this document, investors should independently evaluate the investments and strategies referred to herein and make

their own determination of whether it is appropriate in light of their own financial circumstances and objectives.

Disclaimers

There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any

information set forth in this newsletter. Value Investor Media will not be liable to you or anyone else for any loss or

injury resulting directly or indirectly from the use of the information contained in this newsletter, caused in whole or

in part by its negligence in compiling, interpreting, reporting or delivering the content in this newsletter.

Compensation

The Value Investing India Report receives compensation in connection with the publication of this newsletter solely

through subscription fees and reproduction of content through re-dissemination fees.

Value Investing India Report is an independent value-oriented journal

of the Indian financial markets. Want to learn more? Please visit

www.valueinvestingindiareport.com

About the Author

Ankur Shah is the founder and editor of the Value Investing India Report (VIIR). Ankur has been involved in global

investing since 2004 and began his investing career at Security Global Investors, a San Francisco based global

long/short equity fund. Prior to founding VIIR, Ankur was a Director of Equity Research at Arqaam Capital, where

he was responsible for covering the MENA banking sector and building out the firms equity research platform.

Ankur earned his MBA from Harvard Business School and his BA cum laude in Economics from Pomona College.

Contact Information

For all customer service, subscription, or other inquiries, please visitwww.valueinvestingindiareport.com.We can

also be reached via e-mail at [email protected].
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