the shizzle > shootin' the shit
Value Share thread
petejh:
Edit: Double post
What I also meant to say regarding risk..
Maybe ‘riskier’ is a more apt description for the sectors I invest in but even that concept isn’t really accurate, what’s riskier at the moment - holding a supposedly ‘lower risk’ fund tracking the ‘wrong’ sector or holding a well chosen individual stock in a ‘good’ sector?
kelvin:
Can someone define value shares for me please?
I've a few different definitions in my head.
shark:
--- Quote from: kelvin on February 23, 2022, 09:08:43 pm ---Can someone define value shares for me please?
I've a few different definitions in my head.
--- End quote ---
Great question!
In the generic sense every shareholder believes that there is sufficient value in their investment that the share price will rise otherwise they’d sell.
However, value investing has a more specific meaning and weighs up the value of the tangible assets owned by a company (cash, property etc) it’s dividend payout, its earnings (profit) record and its level of debt. The key metrics are P/TNAV (share price to tangible net asset value ie assets minus debt) PE (share price to earnings) and Dividend Yield (share price to dividend).
shark:
Ok - reached a dozen in the poll - just! :lol:
I’ll try and do a blog post each rest day on my thoughts about investing in individual companies
I’ll start with my own investment history. I think with investing you have to find a style that suits your mindset and it takes several years of successes and failures to find what suits you.
Most people stick with choosing trackers and funds which are the collective investments that make up corporate pensions rather than get involved with investing in individual shares. There are fees and costs associated with funds and trackers but with trackers in particular these are minimal these days.
In effect with buying a low cost FTSE tracker (or similar) you are buying the market and into its long term compounding growth.
I first started investing when I transferred a smallish company pension into a SIPP (Self Invested Pension Plan) about 20 years ago. I can’t recall what prompted me to do it at the time but I posted on a forum called the Motley Fool asking which was the lowest cost tracker to get.
On the thread someone posted suggesting looking into buying individual shares. I said that I had no knowledge and I thought it was gambling. However, I was pointed to another board on the forum called the High Yield Portfolio (HYP) as an alternative approach to a tracker or fund which was devised by one of the Motley Fool writers Stephen Bland. I posted questions on the Board and read Bland’s articles which related to the HYP approach and also his articles on Value (Sadly the whole forum was closed 7 years ago though a copycat forum was started)
The semi-mechanical HYP approach was to buy a dozen of the largest listed FTSE companies that produced the highest (secure) dividend yield with each company representing a different sector as sector diversification offered some risk protection. If for example you buy a FTSE100 tracker the dividend yield is currently 3.4% so by cherry picking the largest yielders like Glaxo (5.2%) and BP (4.3%) for your HYP you can boost the overall yield either for income or for the beautiful effects of compounding.
The other ‘rule’ was once you’ve bought your HYP was to never trade to keep costs low and for the observable fact that most investors make lousy traders.
For reasons I’m happy to discuss dummy and live HYP portfolios outperformed the FTSE over the long term in terms of capital gain because yield is a value indicator (though not the strongest value metric) which is a point I’m happy to discuss.
Surprise, surprise I became a regular poster on the Motley Fool and also opened Share ISA’s and increased the money I put into the stock market and tinkered with the HYP approach.
A couple of years later I lost what represented a lot of money for me at that time which I’ll post about next time.
If anyone has questions about the High Yield Portfolio approach fire away.
steveri:
most investors make lousy traders.
Data point here. In my younger days, I thought investing was an evil capitalist conspiracy and I was too pure for that. Slightly older, I realised I needed to think about saving for retirement and putting stuff away. All pensions are in bed with The Man, ergo purity lost. I then had a dabble with individual shares, made some ok and some poor decisions. Put some money into tracker funds so I don't have to think about it.
I've also got a small handful of stocks and because of point 1 above, I look at dividends and diversity. If I can get a bit back every year, regardless of what the share price does I'm ahead. I usually reinvest if a DRIP is on offer, its free money after all. If I get some or all or more of my stake back on selling all good. But I don't tend to sell.
Hopelessly naive but the more research I do, the more mistakes I make. So now I'm basically just throwing darts, given the above.
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