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New Managers December 2012

Focus - All about value investing

 

Part 1 - Is value investing a good strategy for today?

To some, value investing makes complete sense, to others it is no longer a suitable strategy as the economic environment can no longer be ignored.

There is handful of value investing funds in Opalesque's Emerging Managers database, and in Part 1 of this report, two of these emerging managers give their views on their strategy - as well as two experienced investors. They explain the challenges and benefits of value investing, and why it is - or not - a good strategy to use nowadays. Part 2 gives you an account of a recent analysis of Buffett' approach. Recent trades will not be covered in this report.

Value investing is the strategy of selecting stocks that trade for less than their intrinsic values.Ă‚ Its main challenge is knowing what a stock's intrinsic value really is.

Alexander Ineichen, well-known hedge fund analyst, author and founder of Ineichen Research and Management AG, describes value investing as such:

Value investing is defined as investing in ‘value stocks'. Value stocks are usually regarded as stocks which have been neglected by the market, have underperformed and therefore trade at low price/book ratios, low price/earnings multiples, and have a high dividend yield. Growth stocks, on the other hand, are stocks for which earnings are expected to grow faster than average in the future.

Benjamin Graham is often seen as the father of value investing, and among the current famous value investors are Warren Buffett (Berkshire Hathaway), Bill Ackman (Pershing Square) and David Einhorn (Greenlight Capital). You can see some well-known value investor......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
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