Why subscribe?
The @InvestingWithWes Substack is a monthly newsletter dedicated to investment research, focusing on small companies, special situations, and stocks that are often overlooked in undervalued markets. By exploring these lesser-known sectors, the average do-it-yourself (DIY) investors can gain a significant advantage over large institutional investors and professional money managers. These opportunities often escape the notice of bigger investors, who may overlook smaller companies or those facing specific challenges. Companies in these categories are usually too small or have specific characteristics that result in a sell-off, causing mispricing. This situation presents an opportunity for sharp investors to uncover excellent bargains that others might overlook.
My Investing Philosophy
My value investing strategy is founded on a disciplined and contrarian approach to uncovering and leveraging undervalued opportunities in the market. Below are the essential components that guide my investment decisions:
Intrinsic Value- My strategy places a strong emphasis on assessing intrinsic value. This involves thoroughly evaluating a company's actual economic worth through its financial statements including earnings, cash flow, and growth potential. By identifying undervalued companies relative to their intrinsic worth, I aim to create a margin of safety that is essential for minimising investment risks.
Long-Time Horizon- A successful investment strategy requires a long-term perspective. While markets can experience short-term volatility, I focus on holding investments for several years (at least five years, provided the fundamentals remain unchanged). This approach allows me to withstand market fluctuations and ensures that the underlying value of the company eventually translates into stock price appreciation.
Contrarian Mindset- My strategy focuses on finding markets and companies that are currently unpopular. While many investors are discouraged by negative perceptions about specific stocks or sectors, I strive to discover value in these often-overlooked areas. Adopting a contrarian perspective helps me pinpoint opportunities that others might miss, potentially leading to greater rewards when market views shift.
Hunting Ground- I typically invest in companies with a market capitalisation below £8 billion and in spin-offs; however, I do not disregard larger companies. If a larger company's valuation appears particularly attractive, I may consider it. I prefer companies valued at under £8 billion because they are often neglected, leading to mispricing. In terms of my circle of competence, I focus on retailers and consumer-driven companies, but I avoid banks, insurance firms, energy companies, pharmaceutical firms, commodity-driven businesses, and specific tech companies.
Strong Management Team- Evaluating a company’s management team is crucial. I favour businesses led by competent and responsible leaders who prioritise generating shareholder value. This is especially important during periods of negative sentiment, as management’s commitment to shareholder returns through buybacks and dividends can indicate both resilience and a dedication to creating long-term value.
Passion- I believe that the most successful investors possess a passion for the process and a curiosity to learn about businesses. If I find myself losing interest in this journey, I should consider transitioning to index funds. This perspective is essential as I continually strive to learn and elevate my standards.
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