Value Investing Podcast

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I will create three episodes to explain the basics of analyzing bank stocks which are a black box to many investors. This episode covers how you can analyze banks' financial statements (balance sheet and income statement), which are vastly different from the financial statements in non-financial companies.  The next episode will cover the steps that you can follow to identify undervalued bank stocks.

Click here (The Bank Investor's Handbook) to learn more about the book referenced in this episode.

Support this podcast through your donation: https://paypal.me/valueinvesting

I will create three episodes to explain the basics of analyzing bank stocks which are a black box to many investors. This episode covers the bank business model in terms of how they make money, what deposit structure and lending portfolio mix are generally good for investors.  Additionally, I explain why it is important for investors to look at Common Equity Tier 1 (CET1) ratio and understand the current capital level of a bank.  The next two episodes will cover how you can analyze the financial statements of a bank and how you can identify undervalued banks in the stock market.

Click here (The Bank Investor's Handbook) to learn more about the book referenced in this episode.

Support this podcast through your donation: https://paypal.me/valueinvesting

This episode covers how management's decision on capital allocation policy can greatly affect the value of your investment in the long term.  Earnings/capital can be allocated in various ways. Warren Buffet mentioned in his shareholder letters as to when it makes sense to use one option vs. the other.  Later, I discuss how you can get a hint of whether the management team acts in the best interest of long-term shareholders.

The following capital allocation options are discussed in this episode.

Reinvested back into the business to maintain the current operation

Reinvested back into the business to grow the business

Used to acquire other businesses via M&A deals

Parked and invested in marketable securities such as Treasury Bills

Distributed to shareholders in the form of dividends

Distributed to shareholders through share-repurchase program

Podcast website: http://valueinvesting.blubrry.net/

Support this podcast through your donation: https://paypal.me/valueinvesting

Followed by EP15 that covered three main valuation approaches (ratio-based, asset-based, and acquisition-based), this episode covers a Discount Cash Flow (DCF) approach to derive an intrinsic value of a company.  In this episode, I discuss three important questions for the DCF approach and show you how you can estimate the intrinsic value by using a 2-stage DCF analysis.

Estimate the first year normalized future cash flow after excluding unexpected items

Determine the first stage growth rate depending on the characteristics of the business

Calculate a terminal value by assuming that the company is mature

Use an appropriate discount rate (either 30 yr Treasury bond rate or other approaches such as WACC)

Additionally, I cover how you can include conservatism as a value investor in three different places (cash flow projection, discount rate, and margin of safety).

DCF tool available on: https://www.gurufocus.com/

Support this podcast through your donation: https://paypal.me/valueinvesting

This episode and next episode cover four valuation approaches to derive an intrinsic value of a company.

Ratio-based approach (covered in this episode)

Asset-based approach (covered in this episode)

Acquisition approach (covered in this episode)

Discounted Cash Flow approach (covered in the next episode)

Podcast Website: http://valueinvesting.blubrry.net/

Support this podcast through your donation: https://paypal.me/valueinvesting

This episode covers seven benefits (four explicit and three implicit benefits) with respect to long-term investing.  Additionally, I do a deep-dive analysis on why most people fail to do the long-term investing despite many benefits, and finally discuss what you can do for your portfolio.

Podcast Website: http://valueinvesting.blubrry.net/

Support this podcast through your donation: https://paypal.me/valueinvesting

This episode covers the following six criteria that Warren Buffett checks when acquiring businesses, and I further discuss how you can apply the Buffett's criteria into your investment strategy as an individual investor.

Large purchases (at least $75 million of pre-tax earnings unless the business will fit into one of our existing

units),

Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround”

situations),

Businesses earning good returns on equity while employing little or no debt,

Management in place (we can’t supply it),

Simple businesses (if there’s lots of technology, we won’t understand it),

An offering price (we don’t want to waste our time or that of the seller by talking, even preliminarily, about a

transaction when price is unknown)

Podcast Website: http://valueinvesting.blubrry.net/

Support this podcast through your donation: https://paypal.me/valueinvesting

Warren Buffett defined the earnings called "Owner Earnings" that is more relevant to the valuation of a company than the reported earnings on the income statement.  The owner earnings can be calculated by adjusting the reported accounting earnings in the following ways:

Owner Earnings = (a) Reported earnings + (b) depreciation, depletion, amortization and certain other non-cash charges - (c) the average annual amount of capitalized expenditures for plant and equipment

= cash flow from operating activities - capital expenditures

Podcast Website: http://valueinvesting.blubrry.net/

Reference Documents: 1986 Berkshire Hathaway Shareholder Letter

Support this podcast through your donation: https://paypal.me/valueinvesting

This episode covers the concept called Mr. Market that teaches how you can be prepared with short-term stock price fluctuations.  It is a very simple concept to understand, but it is not an easy concept to implement in real life if you are an emotional person and are attached to the money invested in the stock market.  Remember that Mr. Market is there to serve you, not to guide you.

Podcast Website: http://valueinvesting.blubrry.net/

Reference Documents: 1987 Berkshire Shareholder Letter; 1985 Berkshire Shareholder Letter

Support this podcast through your donation: https://paypal.me/valueinvesting

This episode covers Warren Buffett's views on why "independent" directors may not be best positioned to represent a majority of shareholder under the current corporate system, and how the board of directors should perform their job on behalf of shareholders.  Warren Buffett provides his own criteria to select the best directors who can truly be independent and are willing to challenge a forceful CEO.

Podcast Website: http://valueinvesting.blubrry.net/

Reference Documents: 1993 Berkshire Shareholder Letter; 2002 Berkshire Shareholder Letter; 2004 Berkshire Shareholder Letter