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Newsletter - July 6th, 2024

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, below tangible equity, etc.) but don’t meet our investment criteria - and our reasoning.

This may help you avoid some ‘value traps’, and stocks that aren’t sufficiently attractive compared to opportunities available today.

For reports of stocks that pass our quantitative and qualitative standards:



Ben Whitmore: Former Jupiter Value Fund Manager

Lots of similarities with our approach - notes below:

3:15 Investment philosophy

Low valuations, cash generation, relatively less attention to profits, not over-levered balance sheets.

9:00 Sector agnostic

A value investor can afford to take a sector agnostic approach - though stability is an important qualitative criterion.

11:00 Valuation Metric

It's important to determine the average earnings across the business cycle to assess corporate value.

12:00 Market valuation

The stock market has traded at 17x 10-year average earnings. This provides a benchmark to assess your stock picks - whilst giving due consideration to competitive advantages, returns on invested capital, growth prospects, etc.

13:00 Mistakes

Emphasizing profits over cash.

It's also important to have a sense of what the balance sheet will look like in a few years (as far as practical) to determine financial vulnerabilities.

16:45 Portfolio construction

Try to avoid too much of the following:

1) Endowment effect: Perhaps best not to hold winners for much longer than three years (as there may be better opportunities); and

2) Buying stocks too slowly once you've decided on their investment merit.

19:15 40% Error rate

Even professionals are wrong 40% of the time. Diversifying across companies and industries to "get a spread of low valuations" is the best way of reducing risk.

21:00 Gardening

Value investing is a lot like gardening. Sell mature stocks to reinvest in new ideas.

26:45 Starting valuations

Buying well is half the selling process. If your starting valuation is low enough, you should expect satisfactory returns over time. [This is precisely what we focus on - in the stocks we purchase and write about.]

27:15 Maverick

To outperform the index, your portfolio should look different from the index. That invites the risk of looking foolish (and wrong) most of the time.


For reports on the best investment values in stocks worldwide:


Wish you an excellent week ahead.


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