Value Investing

is the discipline of investing in stocks that are selling at prices below its intrinsic or true value. Value stocks are often out-of-favor and are therefore avoided by majority of investors. Investing in value stocks is a proven strategy of earning above average returns with lower risk.

The best proof that Value Investing works is the 49-year track record of Warren Buffett, one of the richest person in the world. Berkshire Hathaway, the holding company of Warren Buffett garnered an average annual return of 19.7% from 1965 to 2013 – a record unbeaten so far by anyone in the investment industry.

WideMoat Analytics aims to provide its subscribers, information, tools and analysis to enable them to intelligently analyze companies that are undervalued due to temporary problems, negative investor sentiment or overlooked by major brokerages and become experts in understanding how stock market in the Philippines works. A value investor using our tools looks to profit from these temporary set-back or inefficiencies knowing that in the long run the average market participants will recognize an undervalued company and thus making a handsome return to the value investor.

WideMoat Analytics’ subscribers will have access to stock screens like P/E, P/B, EV/EBITDA, Dividend Yield and 52-week low as well as five (5) valuation models including Earnings Power Value and Graham’s formula as taught by Benjamin Graham, the father of Value Investing and mentor to Warren Buffett.

Latest Articles

CAPE Ratio Philippine Stock Market
By Enrico Chua | Aug 15, 2014

Is there an indicator that can tell an investor if the stock market is overvalued? The answer is yes, Benjamin Graham and David Dodd wrote about...

By Enrico Chua | Jul 31, 2014

Warren Buffett is one of the most successful investor of all time. His investment prowess placed him to be one of the richest person in the world...

By Enrico Chua | Jun 17, 2014

Five time-proven investing principles from Warren Buffett, Benjamin Graham and other value investors.

Market Valuation: Summary Results

To test the long-term predictability of CAPE ratio we took each CAPE ratio for every month and calculated the subsequent 10-year annualized return. Results are shown on Table 1:

Table 1: CAPE Range and Subsequent 10-year p.a. Return (PSEi, 1991-2014)

CAPE ranges0 to 1010 to 2020 to 3030 to 40
Min7.39%-2.66%-4.23%-7.78%
Max20.80%15.97%2.96%-3.78%
Avg15.02%3.97%-2.11%-5.71%

Table 1 shows that low CAPE ratios (0-20) correspond to higher 10-year returns while high CAPE ratios (20 and above) produce low to negative 10-year returns. A more extensive study of the predictive power of CAPE Ratio can be found in our article CAPE Ratio - A Credible Market Valuation Tool on our website.

As ofCurrentAverage% above Avg
CAPE Ratio06/30/201528.0219.1646%
Dividend Yield06/30/20151.67%2.94%76%
Market Cap/GDP12/31/20131.120.8728%

Quote of the Day

When a manager with a reputation for brilliance meets up with a business with a reputation for bad economics, it’s the reputation of the business that remains intact.

— Warren Buffett

Berkshire Hathaway vs S&P 500 (1965-2013)

$100 invested in Berkshire stock vs. S&P 500

*Warren Buffett is the Chief Investment Officer (CIO) of Berkshire Hathaway, a holding company for all his investments.