Just discovering this channel, for being non-professionals this is amongst the best finance content on TH-cam and maybe even the internet, keep up the great work!
Looking at the discount to book value is a classic Graham approach. And yes, book value fluctuates less than earnings so they are more consistent. But every approach has an Achilles heel and looking at book means that you'll find a lot of "commodity sh1tcos" cyclical companies that are trading for way below replacement cost, but nobody wants the assets. A classic example of this is offshore drilling platforms. They are worth a lot at the top of the cycle, but when oil is low, you can have the assets for a fraction of what they paid for it, but nobody wants it. Occasionally shipping companies will trade for less than the scrap value of the ships. Because the owners don't want to scrap the ships, they want to keep sailing the ships and collecting a paycheck.
(sorry if english is bad, not a native) I use my own "Walter Schloss Method" and made a killing the last years with a diversified portfolio (70 positions at the moment). To sort out value traps I use a combination of historical valuations (if the stock has an average valuation of 0,7x price/tangible book over 10 years, it is usually not a bargain at 0,8x, but at 0,3x maybe), technical analysis (no it does not work at all, but it works well to spot cyclicals at the peak and it feels like supports and resistance are really a thing, especially for deep value stocks) and be openminded for the counter thesis (I read the arguments of the other side of the potential trade, if available on Seeking Alpha or sites like that).
You guys are great.
52 week low, G nugget.
Thank you so much 😊✨
Just discovering this channel, for being non-professionals this is amongst the best finance content on TH-cam and maybe even the internet, keep up the great work!
Thanks !!! Such kind words! We always appreciate the feedback :)
This has been very insightful. I wish more TH-camrs take the time to create quality content like this. Thank you for sharing this take. Keep it up!
Thank you very much !!
Looking at the discount to book value is a classic Graham approach. And yes, book value fluctuates less than earnings so they are more consistent. But every approach has an Achilles heel and looking at book means that you'll find a lot of "commodity sh1tcos" cyclical companies that are trading for way below replacement cost, but nobody wants the assets. A classic example of this is offshore drilling platforms. They are worth a lot at the top of the cycle, but when oil is low, you can have the assets for a fraction of what they paid for it, but nobody wants it. Occasionally shipping companies will trade for less than the scrap value of the ships. Because the owners don't want to scrap the ships, they want to keep sailing the ships and collecting a paycheck.
You’re absolutely right !!! That was precisely why we bought oil companies in 2020.
(sorry if english is bad, not a native) I use my own "Walter Schloss Method" and made a killing the last years with a diversified portfolio (70 positions at the moment). To sort out value traps I use a combination of historical valuations (if the stock has an average valuation of 0,7x price/tangible book over 10 years, it is usually not a bargain at 0,8x, but at 0,3x maybe), technical analysis (no it does not work at all, but it works well to spot cyclicals at the peak and it feels like supports and resistance are really a thing, especially for deep value stocks) and be openminded for the counter thesis (I read the arguments of the other side of the potential trade, if available on Seeking Alpha or sites like that).
@@philippr9100 that’s amazing !!!