The art of value investing comes in with time and experience in the market, faith in the stocks and on the economy .As per Charlie munger “all sensible investing is value investing “. Value investing is about both a mind-set as well as a rigoro us discipline. Generally value investors are considered against the current market trend and are slow money makers, however on the longer they are the money giants as they safeguard themselves from the short trends of the market. This means not trying to guess where the herd will send the stock price next.
Generally value investors stand with the value their shares have to offer and 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. This has been the sole reason why value investors are considered pessimist.
One shall understand that the nature of value investor is different from that of a trader. Valuations and the key to understand the reasonable future growth prospect is a characteristics of a value investor. Going against the market trend has always been a characteristics of the investor so they Act only when able to draw conclusions at variance to conventional wisdom, resulting in buying stocks that are generally out of favour of the general market perception rather than popular.
To be an value investor one must understand what the equity actually means it’s not just a trading tool but a part of ownership of the company this view enables an investor to understand the business on a personal level and practice the corporate rights of being an equity shareholder.
MUST’S OF BEING A VALUE INVESTOR:
· A value investor must have the knowledge of the company and shall be rational in decision making.
· A value investor always eliminates emotions in his investments and takes a rational unbiased and knowledgeable decisions.
· Patience is key to being a value investor the trust, faith on an investment
may be tested time to time but a value investor always sticks to his rational investment.
·A rational value investor understands and has the ability to identify the turnaround in the companies.
· A value investor Spends far more time analysing 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.
Talking about value investing the name of big bull Rakesh Jhunjhunwala comes into mind he became a stakeholder in the titan company when he bought 6 crore shares of Titan in 2002-03 at An average price of around Rs 3, according to media reports. Since then he kept on adding more share to his existing holding which resulted into a total holding of 8.3% in titan company ltd and eventually offloading 2.6% stake in the company in March this year.
During the time Rakesh jhunjhunwala witnessed a downfall of more than 40% in his 4000 crore portfolio but even then he kept on raising his stakes in his portfolio that is the faith and belief of a value investor.
· A value investor is always willing to take a loss Not every investment you make will be successful. You will have to take losses throughout your investment career. Sometimes this will be because you made a mistake, other times your investment thesis could have been correct, but the company made a mistake that few could have foreseen. Other possibilities such as natural disasters or wars may cost you money, but that does not mean that the investment thesis was wrong in the first place. These are the things that are beyond your control one can only plan his investment looking at the current situation of the company.
· He always keeps a proper track on his investment and any development in the concerned company is tracked by the investor, generally a value investor keeps a track on the capex, debt situation, Sales figures and quality of the management.
One can initiate the practise of being a value investor by investing in companies with good management, looking at future growth outlook and developing the characteristics of investor than of a trader.