Capital Markets are always attracting investors and the public for many reasons. From return to diversification to ownership of businesses. Accumulating wealth, access to capital, and analysis is a vast subject, but whenever I read about it, some topics are getting highlighted repeatedly. They are mainly Technology, Stock picking strategy, and Of course, Warren Buffett. As an investor, Student of Finance, and CFA Candidate, I know that your success in investing depends upon the stocks you choose, your asset allocation, and the time you hold the stocks. Yes. Timing the market may affect your return, but it is not in your hand. I know many examples where the undervalued stock was not moving despite the so-called fundamentals looking attractive.

Investors handled this problem with the strategy with which they Picked the stock. Value investing is one out of it. I think I don’t need to say to you. There is a joke among investors: If you ask any investor whether he is a value investor or not. There will be only one answer. YES. It is easy to accept that you are a Drug addict than admit that you are not a Value investor.

Recently I saw So many peoples claiming that they are VALUE INVESTOR. But after thorough analysis, I realize that they must be lying.

Plus, we are living in an era of Algo Trading. Some people may claim that they are value investors. Basis? Algo trading?

But when you decided to check what WAS real Value Investing, you came to know about Two books. One is Intelligent Investors. Another is Security analysis. Oh yes. You can’t forget Warren Buffett and Charlie Munger. Especially Charlie, who, in fact, advocates for giving a quality price. One famous investor Mohnish Pabrai once explained the difference between Charlie Munger and Ben Graham Style Investing. Ben Graham means Go-To market search for what is available at cheap. Buy that all.

In contrast, Charlie Munger’s style is to Decide what you want to buy. Then go to the market every day. Check at what Price it is available. Don’t buy unless it is available at the right price. Always Keep sufficient cash in your wallet so you can buy it when it is available at the right price. You can call both of them real value investing.

So when I saw this tweet, it leveraged my thoughts which had been there for a long time.

What is Value Investing?

Simply put, Value investing is nothing but Buy low, sell High.

When I say Low And High, I am comparing it with the Intrinsic Value of the Stock. How to decide that? Different investors will come up with different intrinsic values even with the same data and same situation, same fundamentals, and exact numbers. Value investors believe that the market is wrongly valued stock. So indirectly, the investor assumes that the market is not fully efficient. The investor uses the Price to book ratio, Price to book ratio, debt-to-equity ratio, dividend yield, etc.

Pretty easy? No. It is SUBJECTIVE. What is debt? Is a defined benefit plan included in it? Long-term debt? What are other liabilities? Is the Book value correct? According to one survey, around 45% of management people accepted that either they know another company that has COOKED EARNINGS or part of their earnings is also cooked.

What are earnings? In one case, DLF, an Indian Real Estate company, hides one subsidiary and shows its revenue as its own. Trump Casino and Hotel company in 1999 also made the same show.

In another way, you can manipulate earnings and Assets. But some investors accept that Brand value also plays a key role. Simple example. Berkshire Hathaway, Coca-cola, Toyota, Duracell, Google, Apple, Microsoft. The name itself can make or break. So if you are buying stocks, you are also paying for this. Some value investors take this into account.

The price to Book ratio is essential but not always. It applies only Where assets are heavy on the balance sheet, like Software companies and trading companies. You can’t use this ratio.

Dividends. Important. Yes, beyond doubt. But I look for ROCE and FCFE factors. One more thing is if there is any lease on the balance sheet and if yes, is it Capital Lease, Operating lease. Defined Benefit Plan and Defined contribution plan. Making a big difference.

Last factor. Most. Warren Buffett coined this term, and I am entirely agreed. The best examples Are Google and Amazon (yes, you read it right. AWS is a significant thing.)

So what is all new here in the old concept?

Some people claim that you can replicate Value investing with the help of algorithm trading.

Algo trading, Artificial Intelligence, BOTs.: Technology For Value Investing.

Some of the terms are not even new to investing world. For example, you can set up screen-based investing with BOT or Algo trading. Though not many investors will follow, I believe many people like Apple and IBM are bullish on IT. Someday Artificial Intelligence will also enter the market. Or maybe it is already here. I am already watching some applications for advising investors on where to invest. Even if you give your age as 90, it will still give you a large chunk as equity. Don’t tell me Warren and Charlie are invested in equity. They are different.

One amusing possibility for this is a personal preference. Like BOTs, I Can’t understand that Islamic Finance is different. Tests and choices of Roman Catholics are different. A BOT may give BoAML, SBI, or other Banking stocks. It may advise stock of Lockheed Martin to Impact Investing portfolio. Think about it. A BOT suggests the stock of some Contraceptive Manufacturing companies to Define Benefit Plan of Some churches. BOT advising some unethical companies like Yes bank to me or Advising tobacco stock for me or Some other people who don’t like it.

In 2016, many investors in many different markets complained that the fund manager was not taking the proper steps. As a result, he is losing their hard-earned money. When AMC or Fund house told them that the whole fund was handled by BOT for REDUCING COST, that’s why BOT was selling stock when entire markets were going down. Many of them were shocked.

But what If artificial intelligence entered the market.

Alexa, Siri, Cortana. They are not new to us. What if they will start giving you stock advice? What If your device and another device will contact each other and take care of fundamental stock and technical analysis? Right now in India, an ARC engine from Angel Broking is near this. My question is, will value investing still survive against it? Or going against all this will make a new identity for Contra Investing?