13 Proven Ways to Identify Who are Value Investors

Who can you call value investors?

Courtesy of AAII and The Art of Value Investing

value investors

Who are value investors?

Who can be called value investors?

What is value investing?

Who can you call value investors anyways?

Wait, I call myself a value investor but how can you believe me?

According to the following list, I’m nearly there but not perfect.

Do you think you have what it takes?

Go through the list and see for yourself.

Who are Value Investors? Value Investors Typically:

1. Focus on intrinsic value, what a company is really worth: buying when convinced there is a substantial margin of safety between the company’s share price and its intrinsic value, and selling when the margin of safety is gone. This means not trying to guess where the herd will send the stock price next.

2. Have a clearly defined sense of where they’ll prospect for ideas, based on their competence and the perceived opportunity set rather than artificial style-box limitations.

3. Pride themselves on conducting in-depth, proprietary and fundamental research and analysis rather than relying on tips or paying attention to superficial, minute-to-minute, cable-news-style analysis.

4. Spend far more time analyzing and understanding micro factors, such as a company’s competitive advantages and its growth prospects, instead of trying to make macro calls on things like interest rates, oil prices and the economy.

5. Understand and profit from the concept that business cycles and company performance often revert to the mean, rather than assuming that the immediate past best informs the indefinite future.

6. Act only when able to draw conclusions at variance to conventional wisdom, resulting in buying stocks that are out-of-favor rather than popular.

7. Conduct their analysis and invest with a multi-year time horizon rather than focusing on the month or quarter ahead.

8. Consider truly great investment ideas to be rare, often resulting in portfolios with fewer, but larger, positions than is the norm.

9. Understand that beating the market requires assembling a portfolio that looks quite different from the market, not one that hides behind the safety of closet indexing.

10. Focus on avoiding permanent losses rather than minimizing the risk of stock-price volatility.

11. Focus on absolute returns, not on relative performance versus a benchmark.

12. Consider stock investing to be a marathon, with winners and losers among its practitioners best identified over periods of several years, not months.

13. Admit their mistakes and actively seek to learn from them, rather than taking credit only for successes and attributing failures to bad luck.

—John Heins and Whitney Tilson

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The Art of Value Investing

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