# Value Investing



## kermit345 (10 May 2010)

Hi guys,

Over the past couple months on and off i've been working on my own valuation model based purely on the financial statements of companies. obviously there are way more elements to a company then just the financials that make it a good 'value' investment. But I just wanted to see how the top value investments my model picks out compares to the All ords. I've put together the following types of portfolios to test my model and see how it goes.

Portfolio 1) An equally weighted portfolio of my top 10 identified value investments

Portfolio 2) A portfolio weighted by the value ratings assigned to my top 10 stocks value investments

Portfolio 3) A 50/50 portfolio with half to cash and the other half to the top 10 value stocks equally wieghted

Portfolio 4) Personally selected stocks from my initial criteria in whatever wieghting i see fit

All of these were spread across $100,000. I made all the fake purchases at the closing prices of the 6th of May. Will be updating the portfolios quarterly (i.e. re-adjusting the wieghtings by the value rankings etc). I've also added test portfolios as if they had been bought on 1 July last year as well. I've done the value ratings by the last financial years financial statements and also estimated current financial year statements.

The outcome for the test ones from 1 July last year were all positive, 2 of the portfolios by a considerable margin. Just wondering if anyone else has tried this sort of thing or something similar. Looking for people interested in equations and technical analysis as i've got some further ideas around the portfolios etc but just looking to discuss as well.

Welcome any replies and/or questions. Have to run right now, if I think of anything further ill post it here shortly.

Cheers


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## doctorj (10 May 2010)

Will your model focus on a particular industry, or is it all purpose?


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## So_Cynical (10 May 2010)

I wish people making "value" threads would point out that they mean (buffett) style value .. not value as in what happened on Friday.


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## kermit345 (10 May 2010)

all purpose doctor_j,

Sorry so_cynical was just trying to capture insightful views from all people.


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## kermit345 (11 May 2010)

2 replies, thats a bit disapointing, guess ill have to try elsewhere.


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## Julia (11 May 2010)

kermit345 said:


> 2 replies, thats a bit disapointing, guess ill have to try elsewhere.




If you do a Search you will find there is a heap of commentary about value investing.
No point in continually starting new threads when there are existing ones you could be perusing.


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## weird (11 May 2010)

Post your picks and exits, and will track it. Most TA and FA is flawed by a bias of just gambling, and wishing to be right. The books are cooked. Trend lines, bend lines.


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## kermit345 (12 May 2010)

HI guys,

Julia - Not really looking on ideas or commentary on how I can achieve value investing, more so looking for interest in equations and/or models and specifically the way i've gone about it to see if I can refine it somehow. However I will do a search when I get time and take a look to see if there is any other relevant threads that could give me any further ideas.

wierd - Not at home at the moment so can't give you the specifics on what stocks I've placed in the portfolio, or rather what ones my model has. I certainly haven't placed any personal bias in the stocks and don't hold any of them personally either, this is simply a test phase to see if the stocks my equations and model has produced can consistently provide greater returns then just indexing. I haven't really came up with an exit strategy either, something that I should probably implement within my spreadsheet.

I can post a brief version of my methodology if anyone is interested just so people can get an idea of how i've gone about it. There are still some tweaking that needs to be done on my part in the process, but its slowly getting there. Once I get it finalised or to a stage that I believe is very close to finalised and its had some more testing, I might see if I can find an equation to work on entry points and where there is resistence etc, but thats still a while off.


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## brty (12 May 2010)

kermit,



> I certainly haven't placed any personal bias in the stocks




The bias comes in your selection criteria. Your perception of value is probably different to someone else, this then translates into the stocks.

Perhaps we should be discussing what definition of 'value' people are using.

brty


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## kermit345 (12 May 2010)

True brty good point, sorry I was more thinking of the viewpoint of personal feeling and attraction to stocks that would make me include one over another. But in the case you've given then yes I guess the wieghtings i've given to certain value attributes of a stock to give it its value rating would give my personal bias as to what i think makes a value stock (combined with the bias i've gathered from reading a few different sources).


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## Pivotonian (12 May 2010)

kermit345 said:


> I can post a brief version of my methodology if anyone is interested just so people can get an idea of how i've gone about it. There are still some tweaking that needs to be done on my part in the process, but its slowly getting there. Once I get it finalised or to a stage that I believe is very close to finalised and its had some more testing, I might see if I can find an equation to work on entry points and where there is resistence etc, but thats still a while off.




I think this is a good idea, if you want some constructive commentary.

Its very hard to comment on your methodology, biases, and "_equations and/or models and specifically the way i've gone about it to see if I can refine it somehow_" if we don't know anything about what you've done.


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