value strategies + buffet and lynch

cost of rebalancing - tax cost are not

deferred

sale of stock creates

tax bill

sale of stock at loss creates

can offset gains

when rebalancing client portfolio, keep

mix of asset classes close to target allocations

wthin an asset class, portfolio might need rebalancing to

to bring risk within guidelines, sell poor investments, and change the weight on positions

asset price changes almost always

cause you to change the portfolio

large change in portfolio structure

growth to value, move out of bonds, etc

portfolio monitoring - events to consider

fed intervention, Ukraine invasion by Russia, Covid, Inflation

consider if asset have changed

defensive investor

balanced investor of 50/50 high grade bonds and common stock

when appreciated markets

take a profit and reduce equity position; increase equity portion in bear markets

contrarian approach

buying assets when others are selling and selling when others are buying

defensive bond position

government bonds; better to forgo some returns from high coupon bonds (1-2% not worth it), do not substitute preferred for bonds

defensive equity position - graham

have 10-30 different stocks, large cap, high quality, conservative leader in industry, long history of dividend payments, set max price over 7 years (not above 25 times and no more than 20 times last 12 month earnings)

enterprising investor

high grade bonds and equities, add foreign stocks, preferred stocks, and second tier stocks when they are available at discount, do not follow market timing stragy, continue 50/50 split, change risk profile of securities

available at discount - enterprising investor

2/3 value

enterprising 3 fields - equities

large cap stocks (temporarily unpopular that have cash), stock DCF at least 50% higher than current price, special situations or workouts (corporate restructuring or debt restructuring)

value investing: reduce stock position in

bull markets

bull market

high price, high p/e ratios, low dividend yields (compared to bond yields), high use of margin or speculation, higher number of IPOs for lower quality stock

criteria for defensive equities

adequate size (large cap), strong financial condition, uninterrupted dividend payment for 20 years, no losses for at least 7 years, increase per earnings 33% over past 10 years, price no more than 1.5 book value, price no more than 15 times average earnings of past 3 years

criteria for enterprising investors

current assets (worth more than 1.5 times current liabilities and debt no more than 110% of net current assets - industrial companies), earning stability (no deficit in last 5 years), some current dividend, earnings growth, margin error price .3 to .5 of intrinsic value

peter lynch

wants to find companies that will increase 10x, easy to do for small investors and hard to do for large funds, looks at smaller companies (higher growth potential), classified stocks in 6 categories

slow growers

companies grow at same rate as GNP, have regular and high dividend, typical companies utilities, purchased for dividend payment

the stalwarts

higher growth (10-12%), Coca-Cola, Bristol Meyers, Proctor and Gamble, little chance of going bankrupt but high growth not assured, check p/e to determine if you are over paying, hold stock until appreciated 30 to 50 percent

fast growers

grow at 20-30% per year, hold while earnings increase and expand in size (p/e and earnings grow in parallel), can be industry leaders in slow growing industry, have replicated models in other cities or countries

cyclicals

regular increases or decreases in profit, do well in end of recession and bull market, tracking inventories can help, industries (automotive, airlines, steel, etc)

turnarounds

companies not currently growing but in recovery (will grow at fast pace), subsidized (government loans or guarantees), unanticipated problems (accident), good division within bankrupt companies, must analyze debt levels and liquid assets

restructuring

dump unprofitable division/products

asset plays

company that has unrecognized assets (cash, real estate, carry forward losses), must find hidden losses before analyst