"Value stocks are about as exciting as watching grass grow. But have you ever noticed just how much your grass grows in a week?" - Christopher Browne (Tweedy, Browne) | | - 5-star investment idea
- 3 Tips for your investment strategy
- How to invest in equities and stay sane
- Value Investing - Investing for grown ups?
5-star investment idea
The stock ratings have been re-calculated using data as at the end of April and as usual there has been a certain amount of 'Brownian motion' of the companies as they jiggle around randomly. As usual though, most of the 5-star stocks are still well known, market leading companies like today's idea.
Legal and General (LGEN 114p) is the well known, FTSE 100 listed finance company, which is also where I bought my first index tracker many years ago. The focus is on insurance, savings and investment products with low costs and broad appeal. Apart from a single loss in 2008, the company has been steadily profitable for many years, growing broadly in line with inflation. In short it's a big, stable company with a relatively reliable dividend, so it will probably be attractive to income investors, although at current levels there is a real possibility of solid capital gains too.
- The current PE is around 9, while the price to 10 year earnings average is 12, both of which are below the marke average.
- The company has grown earnings and dividends steadily over the years, with the dividend going from 4.8p a decade ago to 6.4p today, which is an increase of 33%. This is a similar rate of growth to most other large companies.
- The yield at current prices is about 5.5% for a dividend which most analysts expect to keep rising at least in line with inflation. The FTSE 100 on the other hand currently yields something closer to 3.6%.
Click here to try the Defensive Value Report for free and see the complete list of 5-star stocks each month plus every trade in a model portfolio based on this rating system.
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3 Tips for your investment strategy
I think that strategy and temperament are the most important aspects of investing, and that the most important part of an investment strategy is its high level structure. This post covers three of the key pillars to creating a solid foundation for an investment strategy.
More from around the web
How to invest in equities and stay sane
A constant theme from the UK Value Investor typewriter is the need to ignore most of the noise generated by the media and others. This excellent article from Edward Hocknell of Baillie Gifford gives a whole heap of tips on how investors can control their nerves and stay focused on the long-term.
Value investing - investing for grown ups? (PDF download)
This report from Aswath Damodaran, Professor of Finance at the Stern School of Business at New York University, has caused something of a stir among value investors as it looks into the evidence that value investing in the real world has so far failed to live up to promise of its fantastic 'back-testing' results. In short, he finds that value fund managers don't outperform the market any more than anyone else, and generally underperform passive value strategies.
In the report's conclusion, the good professor states mentions the "need for discipline and consistency in value investing" and "the very real fact that beating the market is always difficult to do, even for a good value investor". I must say that I totally agree with that. In my years as a value investor I know that, certainly in the first few years, I probably took away more value than I added by actively reviewing companies rather than just investing by the numbers, and I have always been more quantitative than virtually all of my peers.
The lesson remains the same as always: Have a disciplined approach, a consistent approach, and a rational approach.
Thanks for reading, and as always if you have any questions just reply to this email.
Yours sincerely,
John Kingham, Editor of UKValueInvestor.com and the Defensive Value Report
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