In looking at John Templeton’s Maxim’s in part one, we did not get to an actionable side to his investing philosophy. Good ideas but how did he really invest.
To me the story that sums up what he was about is probably the most famous tale he recounts in an interview for Smart Money. Just before World War II broke out he bought 100 shares of the 100 plus stocks that were trading on the New York Stock Exchange below 1 dollar, including 37 that were already in bankruptcy. He summed up his reason succinctly. War was looming in Europe. Things that had been in surplus before would not be in surplus in war time. He found opportunity in the political situation of his day. Three years later 100 of 104 companies were profitable. He looked for opportunities that value could be perceived that the herd of regular investors did not see.
Part of this blog’s mission is to help beginning investors gather the essential information so that you can make informed investment decisions on your own.
Simoleon Sense has an insightful interview today with the author of the great deep value blog Greenbackd. You can get to the interview here. Both blogs are terrific for incredibly different reasons and I have mentioned both in previous blogs, but it bears repeating.
You could think of this as a part two from yestedays post that laid out in outline what we missed for those of us that either didn’t know about or couldn’t attend the 2009 Value Investing Congress. One of the most interesting items I have read about this years Congress was the speech given by David Einhorn, a person I was not previously familiar with. You should download the speech NOW. He spoke about a previous failure that made him realize that as a good value investor you can not be agnostic to macroeconomic factors.
Value Investing Congress is a geek fest for value investors like me. I have not been able to attend because my paying gig won’t give me time off during the periods they offer this two day Value Investing series in October and May. Last week the fall version took place in New York. I won’t give you the summaries myself. Go to the source directly.
This is the third installment in our Investing Strategies for Beginning Investors. The first two explored Philip A. Fisher. This week we turn to the much respected John Templeton. Sir John, if youare into that kind of thing. When you look at Templeton you are veering into contrarian territory with an important dose of Deep value investment principles. Goodie.
Earnings per share is a pretty self revelatory. It is the net earnings of a company divided by the number of outstanding shares for a given time, usually a year, or one quarter. EPS= Net Income/shares outstanding. There are various ways of calculating this. If you go to the Income statement you will find a line item Net Income, which is your numerator. For smaller companies the number of shares can be as simple as the total shares at end of the period you are measuring. For a larger company or one whose number of shares changes during the measured period, a more accurate way is to use a weighted average of shares.
For companies where warrants or convertible shares or options are relevant then a better tool is to use the diluted earnings per share which includes all these potential shares in the number of shares outstanding. Thus the diluted earnings per share is usually lower than EPS.
I have often said, it doesn’t necessarily help to be right. That could not be truer for put options. My position in October put options for GE expired on this past Friday. This will conclude the position I opened with the post Not for beginning Investors. What I should have also said is, that it was not for me either. I sold my 4 contracts before they expired worthless, for a little better than $40.00 after fees which is $80.00 less than I purchased them for. Since this was as much a learning experience as a hedging position. Let me review the successes (if any) and obvious failures.
This is the second post summarizing Philip Fisher’s investment strategy see Investing Styles for Beginning Investors. Old Phil Fisher’s investing strategy was pretty straight forward. He wrote an influenial book called Common Stocks and Uncommon Profits. In that book he outlined how he evaluated a company. Fisher asked fifteen key questions ( he called them points). You could not buy the company’s stock if you were unhappy with the results of your information quest.
The most important thing for beginning investors is to figure out what type of investing strategies they are comfortable with and then embracing it whole heartedly. But how do you discover what works for you? Of course you read this blog. But let’s say you want something more. You can always look at the greats, […]keep looking »