{"id":2685,"date":"2017-06-30T06:45:13","date_gmt":"2017-06-29T22:45:13","guid":{"rendered":"https:\/\/www.smallcapasia.com\/?p=2685"},"modified":"2017-06-27T23:20:37","modified_gmt":"2017-06-27T15:20:37","slug":"3-common-value-investing-strategies","status":"publish","type":"post","link":"https:\/\/www.smallcapasia.com\/zh-hans\/3-common-value-investing-strategies\/","title":{"rendered":"3 Common Strategies Of Value Investing You Need To Know"},"content":{"rendered":"

Value Investing is Not A Strategy<\/strong><\/h2>\n

As we established in the beginning, value investing is not a strategy for investors. It is rather\u00a0a philosophy on which to guide investors.<\/p>\n

As mentioned by Warren Buffett on the \u201cSuperinvestors of Graham-and-Doddsville\u201d, the super investors have different strategies and owned different stocks on their portfolios.<\/p>\n

Nonetheless, each of them was able to produce great performances in their own way.<\/p>\n

So, if value investing itself is not a strategy, what\u00a0are some of the strategies that great investors used? Now, let us look at three of the common strategies of investing.<\/p>\n

Deep Value: Searching For That Cigar Butt<\/strong><\/h3>\n

The beginning of value investing starts from Warren Buffett\u2019s mentor, Benjamin Graham.<\/p>\n

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Graham is famous for being a deep value investor. He had a strict approach when it comes to valuing a stock. He is also famous for finding stocks that are trading very cheaply to their net asset value. Warren Buffett coined this style of investing as the \u201ccigar butt\u201d method.<\/p>\n

Basically, an investor that practice this form of strategy is searching for a company that is trading way below its net asset value. The idea is to find a company that is so cheap that it would be profitable for the investor to liquidate the company after he\/she buys it.<\/p>\n

Here is an example:<\/p>\n

Company A has a total asset of $100 million and has S$50 million of liabilities. This means that company A would have a net asset of $50 million. Moreover, its assets are relatively liquid assets that can easily be converted into cash. This could be properties it owns, its inventory, its short-term receivables or even cash the company is holding.<\/p>\n

If the company has an outstanding share count of about 100 million, it would have a net asset per share of $0.50 per share. So in theory, a deep value investor might buy the company if it is only trading at $0.20 per share.<\/p>\n

This means that even if the company is to close down and sell all its assets, the investor would still be able to profit from it. In essence, the investor is buying its net asset, that is worth $50 million at just $20 million, a 60% discount.<\/p>\n

Dividend Investing: Show Me The $$$<\/strong><\/h2>\n

Another strategy of investing is focusing on the dividends of a company.<\/p>\n

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This follows a simple idea of \u201cMoney in my hand is better than money in the management\u2019s hand\u201d.<\/p>\n

An investor\u2019s job is to allocate the funds toward the best possible investment. A job of a company is to generate returns for investors. Therefore, a dividend investor will look for companies that pay a decent dividend that allow him\/her to reinvest at a constant schedule.<\/p>\n

A dividend investor would look at these factors when deciding on an investment.<\/p>\n