Value traps – 18 Questions to help you avoid them

Market Crash

As value investors we’re looking for “cheap” shares that are unpopular almost by definition. What we don’t want though are “value traps”, shares that are unpopular because the company is heading into permanent decline, or where a crisis is about to explode. Instead what we want are cheap shares from companies that will continue to […]

My new investment spreadsheet

Gears

Recently I’ve made a few changes to my investment strategy and those changes are now reflected in this investment spreadsheet, which you can download and use if you so wish (and at your own risk). These changes have been made in line with my commitment to a Kaizen approach to investing, i.e. continuous small improvements. The changes […]

[Investment review] Imperial Tobacco returns a stress free 27.8% in just under 2 years

Imperial Tobacco share price performance 2014 12

Imperial Tobacco is the epitome of a defensive company. It generates a steady flow of cash from millions of loyal customers who spend small amounts of their income on the company’s products every day, regardless of the state of the economic. The result for shareholders has been steady and progressive but also relatively rapid dividend […]

Measuring leverage in banks, insurance companies and non-financial companies

Debt

Companies use leverage because it can boost earnings, and that’s a good thing. But leverage is also bad because it increases the volatility of earnings and increases the risk of bad things happening such as rights issues, dividend cuts and bankruptcy. The trick is to find companies with the “right” amount of leverage given your […]

Taking account of return on capital employed

Investment Analysis

The return generated by the capital employed within a business can be a useful guide to its competitive strengths, and whether the company’s management are chiefly interested in enriching themselves or shareholders. Return on capital employed in a competitive market Picture the following scenario: You decide to set up a company which will run a […]

Case study: Investment in Greggs PLC shares returns 30% in less than 2 years

Selling greggs plc chart 2014 10

In December 2012 I invested 3.4% of the UKVI defensive value model portfolio into Greggs PLC and also added it to my personal portfolio too with a similar allocation. Last week I sold those shares for an annualised return of 15.8% per year over that slightly less than 2 year period. This short case study […]