Points for Selecting Value Stocks No.2

Hello.
Last time, we talked about the basics of value investing and highlighted the key points. How was it?
Have you managed to get a sense of it to some extent?

① Value Investing = Long-term Investing? The Power of Compounding

So generally, value investing is said to be long-term investing, right?
There are also opinions that long-term investing is merely a way to hide unrealized losses (laughs).

Warren Buffett is famous for its perpetual holdings, such as Wells Fargo, AMEX, Coca-Cola, IBM, etc.
But in fact, regarding other holdings, it is not widely known that they are often sold after a few years, or even within a year, more often than not.
In short, value investing is not necessarily equal to long-term investing.
(To be honest, this perpetual holding thing exists precisely because of the Berkshire Hathaway structure, but that will be another occasion.)

Last time,
> ROIC — capital cost, multiplied by invested capital total, is EVA (Economic Value Added), and this, as a change in shareholder value (in the medium to long term), leads to an increase in market capitalization, so by holding companies that continuously increase corporate value over the long term, you earn capital gains simply by leaving it alone, >

we explained.

In other words, 'a company that continuously increases its corporate value' = requires a high corporate value, a positive spread (ROIC - capital cost).
If so, leaving it alone will yield capital gains, indeed the more you leave it alone, the more capital gains you earn, leading to long-term investing as a result.

This is the meaning of 'value investing is an investment that makes time a friend' as stated in the title.
Because it is an investment in the value of a company whose assets increase over time, if the management of the investment target deteriorates, selling in the short term is quite possible.

To glimpse this incredible compounding effect a little,
for example, Buffett's CAGR (compound annual growth rate: 1965–2015) is 20.8% according to the latest letters, so if you had entrusted 1,000,000 yen to Berkshire’s fund for 50 years…

1,000,000 × (1 + 0.208)^50 = 12,686,642,860

It becomes about 12.7 billion yen (laughs).

② How to Choose Value Companies

Last time, we said, 'First, calculate the ROIC of a company you are interested in or a candidate for investment,' but it is important to first confirm the cash-creating ability that underpins corporate value.

Continue from here

↓↓↓