Value stocks are central to my portfolio. Clearly, I’m no Warren Buffett, but buying undervalued stocks gives my portfolio an excellent chance of outperforming the index.
We’re now in July, and that means earnings season is approaching. Companies tend to report their quarterly earnings a couple of weeks after the end of a quarter — end of December, March, June, and September.
So is now a good time to invest in value stocks — after all, the market is somewhat depressed — or should I be keeping my powder dry?
Being a value investor
Value investing involves finding stocks that trade at a discount versus their intrinsic or book value, and holding them until they’ve realised their potential.
This strategy has continually outperformed all major indexes since the Second World War — just look at Buffett’s success.
So how can I be a successful value investor? Well, here’s a few fundamentals.
Focus on undervalued assets
Conduct thorough fundamental analysis
Search for companies with strong fundamentals
Take a long position
Emphasise margin of safety
Employ a disciplined approach to buying and selling
Stay patient and avoid emotional decision-making
Earnings season
There’s often increased volatility during earnings season. This is when companies inform the market about their performance over the past three months while providing additional guidance for the coming months.
This influx of fresh information can significantly sway investors’ perceptions of a stock’s financial health and future prospects. In turn, this leads to increased buying or selling activity. And if a company’s earnings report surprises investors, either positively or negatively, it can lead to significant price movements in the stock.
Ready to pounce
As a value investor, I’m looking to emphasise the long-term prospects of the company rather than getting caught up in short-term earnings volatility.
After all, some of my top long-term investments, such as Barclays, could well report a poor quarter in the context of rising defaults and a slowing economy. In theory, I shouldn’t let this impact my long-term position on the stock.
Moreover, as Buffett says “bad news is an investor’s best friend” as it allows us to buy more of the stocks we believe in at lower prices.
It could pay me to hold off buying any more stocks until the earnings season is underway. Sometimes the market can overreact to news — just look at what happened in March — and this can present interesting buying opportunities.
Research and preparation are key. It will pay me to conduct thorough research before earnings season begins, allowing me to identify companies of interest, analysing their expected performance, and their long-term prospects.
I’m doing my research on several value stocks including Anglo-Eastern Plantation, which is already cheap at 4.5 times earnings, and mining giant Rio Tinto. But now is the time to make that shortlist to ensure I’m ready to act if the opportunity arises.
The post Value stocks: what I’m doing before earnings season! appeared first on The Motley Fool UK.
Don’t miss this top growth pick for the ‘cost of living crisis’
While the media raves about Google and Amazon, this lesser-known stock has quietly grown 880% – with a:
Greater than 20X increase in margins
Nearly 60% compounded revenue growth over 5 years – more than Apple, Amazon and Google!
A 3,000% earnings explosion
Of course, past performance is no guarantee of future results. However, we think it’s stronger now than ever before. Amazingly, you may never have heard of this company.
Yet there’s a 1-in-3 chance you’ve used one of its 250 brands. Many are household names with millions of monthly website visitors, and that often help consumers compare items, shop around and save.
Now, as the ‘cost of living crisis’ bites, we believe its influence could soar. And that might bring imminent new gains to investors who’re in position today. So please, don’t leave without your FREE report, ‘One Top Growth Stock from The Motley Fool’.
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More reading
How I’m buying cheap UK shares now and aiming to become a stock market millionaire
A thousand ways to make $1,000 like Warren Buffett
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Should I buy cheap Rolls-Royce shares while they’re still under 155p?
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James Fox has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Value stocks are central to my portfolio. Clearly, I’m no Warren Buffett, but buying undervalued stocks gives my portfolio an excellent chance of outperforming the index.
We’re now in July, and that means earnings season is approaching. Companies tend to report their quarterly earnings a couple of weeks after the end of a quarter — end of December, March, June, and September.
So is now a good time to invest in value stocks — after all, the market is somewhat depressed — or should I be keeping my powder dry?
Being a value investor
Value investing involves finding stocks that trade at a discount versus their intrinsic or book value, and holding them until they’ve realised their potential.
This strategy has continually outperformed all major indexes since the Second World War — just look at Buffett’s success.
So how can I be a successful value investor? Well, here’s a few fundamentals.
Focus on undervalued assets
Conduct thorough fundamental analysis
Search for companies with strong fundamentals
Take a long position
Emphasise margin of safety
Employ a disciplined approach to buying and selling
Stay patient and avoid emotional decision-making
Earnings season
There’s often increased volatility during earnings season. This is when companies inform the market about their performance over the past three months while providing additional guidance for the coming months.
This influx of fresh information can significantly sway investors’ perceptions of a stock’s financial health and future prospects. In turn, this leads to increased buying or selling activity. And if a company’s earnings report surprises investors, either positively or negatively, it can lead to significant price movements in the stock.
Ready to pounce
As a value investor, I’m looking to emphasise the long-term prospects of the company rather than getting caught up in short-term earnings volatility.
After all, some of my top long-term investments, such as Barclays, could well report a poor quarter in the context of rising defaults and a slowing economy. In theory, I shouldn’t let this impact my long-term position on the stock.
Moreover, as Buffett says “bad news is an investor’s best friend” as it allows us to buy more of the stocks we believe in at lower prices.
It could pay me to hold off buying any more stocks until the earnings season is underway. Sometimes the market can overreact to news — just look at what happened in March — and this can present interesting buying opportunities.
Research and preparation are key. It will pay me to conduct thorough research before earnings season begins, allowing me to identify companies of interest, analysing their expected performance, and their long-term prospects.
I’m doing my research on several value stocks including Anglo-Eastern Plantation, which is already cheap at 4.5 times earnings, and mining giant Rio Tinto. But now is the time to make that shortlist to ensure I’m ready to act if the opportunity arises.
The post Value stocks: what I’m doing before earnings season! appeared first on The Motley Fool UK.
Don’t miss this top growth pick for the ‘cost of living crisis’
While the media raves about Google and Amazon, this lesser-known stock has quietly grown 880% – with a:
Greater than 20X increase in margins
Nearly 60% compounded revenue growth over 5 years – more than Apple, Amazon and Google!
A 3,000% earnings explosion
Of course, past performance is no guarantee of future results. However, we think it’s stronger now than ever before. Amazingly, you may never have heard of this company.
Yet there’s a 1-in-3 chance you’ve used one of its 250 brands. Many are household names with millions of monthly website visitors, and that often help consumers compare items, shop around and save.
Now, as the ‘cost of living crisis’ bites, we believe its influence could soar. And that might bring imminent new gains to investors who’re in position today. So please, don’t leave without your FREE report, ‘One Top Growth Stock from The Motley Fool’.
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setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
How I’m buying cheap UK shares now and aiming to become a stock market millionaire
A thousand ways to make $1,000 like Warren Buffett
Interest rates are 5%. Should I dump dividend stocks and put money into savings accounts?
Should I buy cheap Rolls-Royce shares while they’re still under 155p?
How I’d invest £10k in FTSE 100 shares to aim for a £250 monthly passive income
James Fox has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
