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value investing in stocks - even with current unemployment rates high

for value investing in stocks and other theories (go here)


Many people right now are frantic with the market and its volatility. What they do not understand is that through the history of crises in the economy, they almost always eventually pass, and there are many companies that are undervalued in the process. If we buy undervalued companies that have been speculated too low due to market conditions that will not last, then we will make money value investing in stocks.


Now the Question many people ask me all the time, is how can I screen for them in a down market like we are in now? Well I am about to tell you how you right now can find good stocks that are small caps, which will allow you to think of yourself as an owner rather than an investor. This is the start of the secret for value investing in stocks.Was a government bailout of Fannie an Freddie smart?

There are some rules to remember when we talk about stocks, and the most important one that I always tell people is that it does not MATTER WHAT THE STOCK PRICE IS. The price of a given security is determined by supply and demand, and it has nothing to do with whether or not it is UNDERVALUED; remember we are looking for undervalued companies. For instance say a stock is only a small two dollars per share in price, but it's intrinsic value is actually four dollars per share.


This means that the stock is still heavily undervalued even though the price is LOW to start with. The same thing goes with expensive stocks, if the stock is 100 dollars per share, but it's intrinsic value is 200 dollars per share, then it's just as undervalued as the example we gave earlier with the two dollar stock being worth four dollars because in both cases they should be twice the price that they are for value investing in stocks.Banking companies buying the small, and how to profit.

Now it's time to buy good securities, to do so we have some idea as too it's real intrinsic value, and if it's long term value will hold. There are numerous stock screens available online which you can use for free. The first thing to look for in this crazy market is companies that have more cash per share i.e., total cash is greater than the market price. Such companies are rare but they do exist since companies on stock exchanges are only what people are willing to pay per share, and many times people are wrong. Warren Buffet himself has stated that companies that have more cash per share than the market price are a safe bet if others factors are present.Health Care Stocks, are they maybe the BEST?


The next screening principle we need to look at is book value per share. If the book value per share is greater than the current market price that is a sign that the stock is undervalued as well. Book value per share is how many long term and short term assets each share is entitled too, or holds as it's value. This is yet another sign that a stock is undervalued if it meets the book value criteria stated above. MOST IMPORTANTLY though we need to look at ROE and ROIC which is return on equity, and return on invested capital. Both should be greater than or equal to 20 and they should be NO MORE THAN five points off in difference. Even if the cash per share or book value per share is greater than the market price the ROE and ROIC must be compared above, if the ROE is greater than the ROIV it means the company is financing a lot of itself through DEBT which is your enemy when owning a company and value investing in stocks.

low risk investing

value investing in stocks - why even rich people are losing money

Even rich people are losing money at this point with our current market crisis. Some rich people are even losing billions of dollars in their net worth. The greatest investor of all time Warren Buffet has even been losing money. Some of you might be asking, if all these famous and rich people are losing money why should I even think about investing in stocks at this point? The reason is because poor people actually have advantages over rich people when they invest. For one thing Warren Buffet many times has admitted that he would be investing a lot differently if he had less than one million dollars. What he means is that when he was younger and not nearly as rich as he is now he could buy into SMALLER companies that had a dedicated management, and weren't so dependent on the general stock market like the bigger companies are and they propose a better deal value investing in stocks.

Now with Billions of dollars investors like Warren Buffet would be wasting their time buying into companies with a small market capital. The other advantage poor people have over the rich is that they can be in and out of a given investment in a very short period of time. This is way different from rich people who have to take weeks sometimes to put a large portion of their capital in a position, or for that matter take it out. Now that we know our advantages we must exercise them to out advantages so we can invest like Warren Buffet did before he made his first ten million. After all if most of us had only a few million we would be living a lot better lives than what we are currently living with smart ideas about value investing in stocks.


So What makes these little companies tick and go way beyond the general markets like the DOW and NASDAQ? The answer is good products, a dedicated management, and will power to take on new markets all the time for even more money. There are many ways to determine companies like this. Seeing if the company pays a dividend in a general down market, or seeing how much cash or insider ownership the company has are a few of the ways of telling if the business is good or not. The only way to beat a market like we have now is to think about being part owner in good long term businesses, that have a sound and tough business model to compete with. Despite current unemployment rates and the bad economy we can make money in the long run. Using this idea of good value stocks we will beat out investing in index funds or trying to make a quick buck with trading. investing in bonds instead of investing in the stock market

value investing in stocks and investing in the stock market is not a prediction

Many people these days think of investing in the market as a way to predict whether it will go up or down. Worse yet they like to use investing trends and charts for prediction. According to many famous investors, you need to think about stocks as if you are entering into part ownership in the business since of course you actually are. If you would have invested 10,000 in WMT when they had their IPO, you would be a millionaire today due to the fact that it was a WELL RUN business, and that it had a lot of cash for it's size. It also had smart management with it's founder in charge i.e. Sam Walton. While it's true that business like WMT don't come around very often, stock prices ALWAYS eventually go to their REAL INTRINSIC value. This means that at any given moment in time their stock price may be too low or too high based on supply and demand and we must profit from this value investing in stocks.ideas about investing in stocks even with with the high current unemployment rates

Next time you think of buying a stock ask yourself is this a business that if I had 100% ownership in, would I feel comfortable owning it COMPARED to other business out there? The market might be going down now, but in the long run if you are buying good businesses at a low price you should profit. You will profit not only from big dividends, but also the companies that are undervalued for the long run WILL go up in the end. If you have a long term buy and hold perspective as buffet did with good companies you have the best chance of winning value investing in stocks.

What did these companies have in common that made them successful? If we are finding good stocks we need to think of this as if we are an owner in the business because well we are. So here are the traits good businesses have had 1. They paid a dividend immediately or shortly after their IPO - this shows that they have extra cash-they are tough.2. They grew very quickly in price like 20% in total a year or more. - an obvious sign that they are gathering assets quick so their market price goes up.3. A large portion of their market capital should be made up of CASH.- Market capital is how much the company is worth if you bought the whole thing.

Usually a portion of this is made up of cash-you want to own companies that have a lot of cash handy so they can build more stores, advertise in tough times, or pay more dividends to shareholders. 4. The founder/management should own at least 20% of the outstanding shares or more; common sense, in the case of WMT Sam Walton still owned most the shares when they had their IPO ,meaning he took the business seriously. 5. They should have low debt. Low debt should be key in finding good stocks since debt holds the company back from doing it's operations. Debt hurts value investing in stocks.