Investing Strategies as a Value Investor

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I would look into the following below, and consider these ratios before investing, as follows:

1. Valuations based on earnings such as P/E & P/B. 

2. Dividend yields. Whilst its important for a company to have a higher amount of retained earnings reinvested into the business than to pay dividends eg. Berkshire Hathaway. But as a passive investor it is good to receive some of the profits as dividends. Rule of thumb is if it is safe to store money in the bank at an interest rate of 1.5%, therefore ideally you want to get a dividend yield of higher than the interest rate in term deposits or government bonds, for the extra risk to be worthwhile. 

3. Net assets > Market capitalization to provide a margin of safety. 

4. Only buy stocks which have a net assets multiple of under 1.5x. 

5.Compare the Book value per share to the current share price. 

6. EV/EBITDA. Some use this ratio to measure, but others consider this irrelevant. 

7. Current ratio = Current assets/Current liabilities. For a defensive investor a ratio of 2 means the company has sufficient working capital. 

8. Return on invested capital (ROIC) = Owners Earnings/Invested capital. Where a company which provides at least 10% is attractive, however a company with over 5% and a strong brand is sufficient.

9. Stick with businesses or industries in areas of your competence, rather than listen to a hot tip.

10. Focus on margin of safety in ways of a sufficient mix between defensive investing and enterprise investing but allocating capital. Use points 3, 4, 5, and 7.

11. If you can work out a near accurate intrinsic value (unbiased) of a company and then look at the share price or market capitalization of the company. If the market capitalization is less than the intrinsic value, you have a strong case of an upside with little downside of the business over time.

Watch video for more explanation: https://www.youtube.com/watch?v=oIgQVf4ZlTU

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