Investing For Value

This is Chapter 21 of my book Mastering Value Investing: Practical Strategies for Real-World Results . Go there for links to the other chapters. Most value investors spend enormous amounts of time asking one question: What stock should I buy? But finding an undervalued company is only the beginning. The harder question is what happens after you buy it. How many stocks should you own? When should you sell? And perhaps most importantly, what should you do when markets fall and your carefully selected stocks fall with them? My approach starts from a principle that differs from conventional portfolio theory. I build my portfolio stock by stock, based on business fundamentals and the gap between price and value. I am more concerned about permanent loss of capital than short-term volatility. But conviction does not mean betting everything on your best idea. I control risk through position sizing and diversification across geography, sectors, company sizes and different types of i...

Tips E-55: A 1-minute summary of my fundamental analysis of Affirm Holdings Inc. (NASDAG: AFRM)      Investment Thesis Affirm is a fast-growing BNPL company, but its credit-driven economics make sustainable long-term value creation highly challenging. Its moat appears narrow and replicable, while high reinvestment requirements and historically weak returns mean recent profitability has yet to demonstrate durable economic value creation. Main Business Affirm operates an instalment-payments network, but its revenue mix reveals a business economically driven primarily by consumer credit. Over the past three years, interest generated roughly half of revenue versus about one-third from merchants, making Affirm economically closer to a credit business than a capital-light payments network. Growth Affirm has delivered exceptional revenue growth, although competition and substantial capital requirements create structural limits to future expansion. Profitability Affirm’s ...

Value Investing Case Study 135-1: A fundamental analysis of SGX-listed PropNex Limited to assess whether it is an investment opportunity.      PropNex operates in one of the most cyclical businesses around: property brokerage. When Singapore property transactions slow, you would expect its business to slow with them. And they do. Between 2016 and 2024, PropNex's revenue had a 71% correlation with Singapore housing transactions. But here is the interesting part. Over the past decade, PropNex's revenue grew at 18.4% CAGR, while PAT grew even faster at 26.7% CAGR.  More strikingly, between 2015 and 2024, revenue grew at about 16% annually versus only 4% for Singapore housing transactions. Its reported residential market share reached 64.2% by 2024. So PropNex wasn't simply riding Singapore's property boom. It was taking a bigger share of the market. My analysis suggests a self-reinforcing advantage built around its large salesperson network, brand, developer rel...

Tips E-54: A 1-minute summary of my fundamental analysis of Bandai Namco Holdings Inc (TOKYO: 7832.T)        Investment Thesis Bandai Namco is a high-quality IP-led business, but its current valuation leaves value investors without sufficient downside protection. Long-term returns should come from powerful intellectual property, international expansion and disciplined execution rather than acquisitions or cyclical growth.  Main Business Bandai Namco monetises globally recognised intellectual property across toys, video games, digital content, attractions and external licensing. Its portfolio includes franchises such as Gundam and Pac-Man.  Growth International expansion and Toys & Hobby have driven growth, while Digital has surprisingly lagged its faster-growing underlying market. Revenue compounded at 5.5% over the past decade, driven mainly by double-digit growth outside Japan versus roughly 2% domestically.  Profitability Gross, contribu...

This is Chapter 20 of my book Mastering Value Investing: Practical Strategies for Real-World Results . Go there for links to the other chapters.   Investors often spend enormous effort analysing revenue growth, margins, ROIC, cash flow and competitive advantages. But after all those spreadsheets and charts, one question still matters: Is this company actually investable?  My approach is to turn all that fragmented analysis into an Investment Thesis Matrix built around two dimensions. First, absolute performance: Can the company grow profitably, earn attractive returns on capital and reinvest effectively? Second, relative performance: How does it compare with competitors — and is it gaining or losing ground? Put the two together and a company generally falls into one of four categories: Compounder. Turnaround. Laggard. Value Trap. But there is a catch. A company that looks like a Compounder may still be a poor investment if its balance sheet is weak. Conversely, a...