Chroma Investing

Value Investing for beginning & small time investors and the value investing strategies of Graham & Klarman

Montier Bitch Slaps Efficient Market Theory

As readers of my blog know I have never believed in Efficient Market Hypothesis. Here is a speech from the brilliant James Montier humiliating the idea, using cartoon characters in the process. Definitely check it out if you haven’t. I must thank Miguel at Simoleon Sense for leading me to this speech and James Montier in particular.

Beginning Investor Terms – Quick Ratio or Acid Test

The Quick Ratio, also known affectionately as the “Acid Test” is a metric used to measure short term solvency. In non jargon it is a formula used to figure out whether or not a company can meet its short term obligations.

What is Focus Investing?

The concept of Focus Investing is devilishly simple. Take the magnifying glass out and focus it on the very best investment ideas you have. Don’t pull the investment trigger unless you can say this is too good to pass up. It is the extreme opposite idea of diversifying your investments in the manner suggested by many financial advisors.

Dollar Cost Averaging (DCA) – Beginning Investor Terms

Dollar Cost averaging is one of those perennially stupid ideas like Efficient Market Theory, that is so dumb, that I wonder how anyone could buy into it. It is completely contrary to the logic of Value Investing. But my opinion aside, it is a popular idea among investmentadvisers, so good to know what it is.

Does Market Timing Work?

The first evidence I discovered that some form of Market Timing may work was when I read Jeremy Seigel’s weighty tome, Stocks for the Long Run. He used what is called the 200 day moving average of a stock to determine a buy and sell point for equities, with investment going back and forth from cash to equities.

Beginning Investor Terms – Return on Assets (ROA)

This week’s Beginning Investor Term is Return on Assets (ROA). ROA is another investing concept, like last weeks ROE, that helps determine if Management is running a company effeciently. Or in this case specifically the assets it has at it disposable. Assets include both shareholder equity and debt.

Return on Equity (ROE) – Investing Terms

Return on Equity (ROE) is one of those fundamental concepts of investing. The principle is simple. What is the return on the stock holders equity invested in a company. As with almost everything else, there is an equation involved. ROE=Net Income/Shareholder’s Equity. Net income in this case is after Preferred shareholder’s dividends have been paid but before common stockholders dividends. Shareholder equity is common shares only, not preferred shares.

Investing in Low Price to Book Stocks- Value Investing Series

It may seem contrary to some investors to invest in Low Price to Book Value Stocks. After all, isn’t there a reason the stock price in relationship to assets is beaten down? Yes, probably. Is it enough that Ben Graham made money using a version of a low Price to Book investment strategy? For some investors, yes. Luckily we have someempirical evidence supporting this investment strategy. There are several studies that lay out the case for investing in these type of stocks.

Beginning Investor Terms – Mutual Fund

Mutual funds pool together the capital of a large number of people, focusing on a specific investment strategy. This strategy is expressed in the prospectus that potential investors can read to help them decide which type of fund to invest in.

What Next In Investing?

This is important because, many stocks are not cheap right now, and finding great or even really good investments has gotten tight. I have mostly been focusing on a couple of strategies, including NCAV stock investing.

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