# Narrowing the list down for value investing



## opulence (26 May 2011)

Hi,

How do value investors narrow down the enormous list of equities and bonds that exist world wide in search of value? I'm sure it can't be a case of start at the top of the list and work downwards?

For example, does Warren Buffet walk into work every day and sit down in front of something similar to the Bloomberg terminal that gives him a short list according to a relatively broad criteria and then he goes about in-depth analysis to sort the winners from the loosers? 

I've looked at some of the scanners online and they seem... inflexible to say the least.

Also, how does he test new theories if fundamental data dating back is so non-standardised as to render it un-backtestable?

Cheers,


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## danbradster (26 May 2011)

I sometimes check hotcopper for what people see as undervalued at the moment, then I research it and decide if I too believe it to be undervalued.

But I also have a list of 30-40 shares that I've owned in the past that I keep track of, it seems easier to notice when they become undervalued since I understand them all a bit.


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## Tanaka (26 May 2011)

G’day opulence,

By coincidence I received an email from Roger Montgomery today who is advising his followers that he is going to reveal his secret .

_"Many Value.able Graduates have asked how I can possibly know the intrinsic values, future prospects, safety margins, quality & performance scores, net debt/equity ratios and over 100 other metrics for all 1852 companies listed on the ASX.

Soon, you will too. For now, “stay tuned”. More details will be revealed shortly. As a Value.able Graduate, my team will invite you to pre-register first.”_

I just scan stocks that have actually made profit for 3 or more consecutive years and have low debt, this greatly reduces your watchlist especially on the ASX, then I research their websites for reports, it is still a slow process. I too would be interested if there is a faster way.


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## maxshram (3 October 2011)

Hi, Opulence!

_How do value investors narrow down the enormous list of equities and bonds that exist world wide in search of value? I'm sure it can't be a case of start at the top of the list and work downwards?_

Well, imo a database with basic company fundamentals (rough p/l +balance + cash flow) for several preceding years would have been just fine. Like the one FT offers access to. If you'd had smth like that on your hard drive, it would have allowed to come up with a set of rules (e.g. Ben Graham's net-nets or profit+low debt or you name it) and filter the whole universe of companies in a matter of minutes. Back then, that's what the young Buffett manually did by daily flipping pages of Moody's Manuals...

I am currently working to build my own database, which would enable me to sort out publicly traded companies based on their fundamentals.


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## tollbridge (3 October 2011)

Hello Tanker

Whilst I'm the last person in the world to recommend any sort of education (fee-based), I'm 100% with Opulance on referring you to Roger Montgomery and his 'Valuablable' book. 

He founded the boutique asset management firm, Clime Asset Managment (ASX:CAM) before deciding to step down as Director and focussing solely on educating people about what he describes as 'A1' long-term investments. His book costs a mere $50.00, he has the highest standing membership from FINSIA, he has experience & education. 

You can hear him speak for $5.00 at ASX investor hours and knowing him on a professional basis since he taught me during the old 'Introduction to the Sharemarket Course" back in 2005 has made a lasting impact on the way I invest. 

I'm not sure what he charges for a full course but I can tell you that you won't be wasting your money on buying his book, seeing him speak in person at an ASX investor hour or downloading some free podcasts off iTunes. 

Google his name and you'll get all the info you need. My 'trading' of forex and CFDs directly contradicts his fundamental investment approach however when I distribute my profits I do have a long-term investment account that almost follows Roger's guidelines word for word. 

All the best,
Alexander Pinnock
Independent Trader of FX, CFDs & Stocks


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## Billyb (3 October 2011)

opulence said:


> Hi,
> 
> How do value investors narrow down the enormous list of equities and bonds that exist world wide in search of value? I'm sure it can't be a case of start at the top of the list and work downwards?
> 
> ...




If you're working with stocks, then start by filtering based on ROE >15%, that will narrow the list a lot. If you are true hardcore value investor then it wouldn't make sense to buy anything with a low ROE. NB I don't do fundamental investing anymore but that's what I used to do


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## Wysiwyg (3 October 2011)

tollbridge said:


> Alexander Pinnock
> Independent Trader of FX, CFDs & Stocks



Hi. Had a look at your website and it is impressive. Only tip I have is lose or losing has one 'o' in it.  Thought it interesting you going in so young and reliant only upon trading to make an income.  
Excellent if you can pick the market consistently and make a go of your chosen endeavor.


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## Tysonboss1 (4 October 2011)

opulence said:


> Hi,
> 
> How do value investors narrow down the enormous list of equities and bonds that exist world wide in search of value? I'm sure it can't be a case of start at the top of the list and work downwards?
> 
> ...




Start with the ones the generate a profit, that should narrow it down by about 70%.

And then work on the businesses you understand, because if you can't understand the business you will make serious mistakes.

Value investing is not just about crunching numbers.

Here is charlie munger and his four filters approach.


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## Tysonboss1 (4 October 2011)

Billyb said:


> If you are true hardcore value investor then it wouldn't make sense to buy anything with a low ROE.




Why?

There are many situations where it would make sense.

If there was a company earning 10% ROE and it was selling at 50% of working capital and paying out 100% of earnings (provided it met all my other criteria), I would Buy it.


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## wayneL (4 October 2011)

tollbridge said:


> ...his 'Valuablable' book.




Was that a Freudian slip? :


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## Tysonboss1 (5 October 2011)

> As a sniper of security price discrepancies it’s vital that I’m aware of general market sentiment. This indicates what the majority of investors are thinking and enables me to predict future market movement. It’s not worth paying a cent for as fundamental analysis can be found everywhere from Yahoo Finance right through to the local daily paper. The Financial Review is by far the king of fundamental analysis however at $100+ a month for a newspaper that delivers yesterday’s news today is not an investment. Fundamental analysis has to be live in order to be of any usefulness hence my reliance on Sky News Business which in 30 minutes can provide me with the equivalent of reading a 50 page newspaper – not to mention breaking news as it happens such as RBA decisions and commentary to keep me awake during slow market days.



Tollbridge

I am not sure the above discription gives an accurate picture of what fundmantal analysis is.


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## wayneL (5 October 2011)

Tysonboss1 said:


> Tollbridge
> 
> I am not sure the above discription gives an accurate picture of what fundmantal analysis is.




Probably because you have a fairly rigid idea of what FA is.

It certainly ain't TA.


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## Tysonboss1 (5 October 2011)

wayneL said:


> It certainly ain't TA.




Maybe a new term needs to be created. Maybe "general market sentiment guesswork/analysis".

I find it hard to use the word analysis when describing someone sitting infront of sky news, trying to second guess the markets next move.


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## tollbridge (10 October 2011)

Tysonboss1 said:


> Maybe a new term needs to be created. Maybe "general market sentiment guesswork/analysis".
> 
> I find it hard to use the word analysis when describing someone sitting infront of sky news, trying to second guess the markets next move.




Listen TysonBoss, cut the rolly eyes crap and instead of critiquing a personal / professional introduction style website under standards more adequately applied to SNB Aust, AFR, Bloomberg etc. try to find it within you a constructive way to contribute something to the independent investor community by offering support and encouragement through a post on ASF for example. 

Of course sitting in front of Sky and trying to second guess future market gains/drops isn't even the beginning of a Market Analysis (Either Fundamental or Technical). It'd be illegal for me to offer advice of a personal or general nature as oulined all over the website. 

The point of the site is discussed on the welcome page. I prefer trading to talking about it as that's what makes me money. You won't find me during the day on ASF because I'll be working. If and when I do get a chance to catch up with people of a similar minded nature it'll be to help and encourage in the areas I do know, like I did in this post. 

I'll now leave you to write your no doubt well thought and carefully worded response about how **** my website is and how little I know about anything before satisfactorily pressing the smiley eyes emoticon and send button. 

Meanwhile I'll be at work. I decided to wake up 20 minutes early this morning to respond on this thread. Probably my worst time management decision. You're probably asleep. 

Regards

Alexander Pinnock

Independent Trader


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## Tysonboss1 (10 October 2011)

That's all well and good, 

It's just your definition of fa is wrong, all I am saying is either change the label to suit the contents or change the contents to suit the label. 

Some one reading your website wishing to learn about investing will get the wrong idea,


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## wayneL (10 October 2011)

Tysonboss1 said:


> That's all well and good,
> 
> It's just your definition of fa is wrong, all I am saying is either change the label to suit the contents or change the contents to suit the label.
> 
> Some one reading your website wishing to learn about investing will get the wrong idea,




Tyson,

Like I said, your idea of FA is too narrow, slavishly mimicking the Graham, Buffett, Munger line.

That's all fine, it's a successful way of doing it over the long term, but like there are many flavours of technical analysis, there are also many flavours of fundamental analysis. 

Don't forget CNNNNN et al are breaking new fundamental news which people can use for short/medium... or even long term gain.

Eg FOMC announcements, earnings, product releases are all of fundamental import in the various terms, so Alex is correct that it is out of order to sneer at this as UNfundamental analysis, when the opposite is certainly true.


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## opulence (10 October 2011)

Can you guys please spare the rest of the thread the incessant FA vs TA argument. This has very little to do with the original post.


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## Tysonboss1 (10 October 2011)

opulence said:


> Can you guys please spare the rest of the thread the incessant FA vs TA argument. This has very little to do with the original post.




I wasn't argueing TA vs FA. I was just commenting on the toll bridge website where it said the best way to conduct FA is by watching sky news.

But thats my last comment here.


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