Value Investing Strategy

Value Investing Strategy

I got my first introduction to the Value Investing Strategy early in my trading journey but I did not get the hints around me…probably because at 21 I did not have the wisdom then. When I got started in the stock market, my goal was to make money. But I had other ideas. I wanted to make money fast (I guess it’s just every traders dream to make money everyday from the stock market by just clicking a few buttons). Fortunately for me, during the dot com boom, I joined an upcoming tech company, Dell, and was fortunate enough to receive some stock options.

Daily Trading Certainly Proved to Be Unprofitable…

And while I was just trading aimlessly with no clue and even profiting at times (with plenty of luck), my stock options in Dell grew exponentially. I was happy making small daily profit through making multiple trades per day and taking small profit each time. Sometimes one loss in my trading can wipe out many profitable trades. Well, at that time, my risk reward ratio was really one sided and even worse for me then was that my broker was actually making more money than me as I rake up brokerage fees for them through my so-called fast trading. By the end of each month and each year, I kept losing money through trading even though it made me feel smart every time I made a small profitable trade. But overall, I was bleeding the portfolio dry every month… slowly but surely.

Not Able to Sell Was a Good Thing…

While I was “busy” trading daily, my Dell stock options was quietly and passively growing… and in fact it was growing exponentially as Dell went through one split after another and doubling in value – not once but several times. Fortunately for me, I could not sell the stock options because they were not mature yet. If I could sell it, I would have sold it whenever I had a small profit. I had to leave the options until maturity for 5 years and I am glad I did!

When the Broker Makes More Money than me…Something is Wrong!

This was really my first exposure to the Value Investing Strategy… well, one component of it which is to buy and hold. Here I was trading daily and being so active and up to date on stock prices, but I was not able to even breakeven. The brokers further rubbed it in by making more money than me after I have done all the “hard work” and taken all the risk. But my dormant “Buy and Hold” position in Dell kept growing despite the fact I really did not do anything else with it.

Let me say this… today, as an Value Investor ( yeah… I know how to differentiate trading and investing now) I do not consider Dell as a value stocks as it does not and it did not pass my value investing screening that I use today.

Dell Experience taught me a little about Value Investing Strategy

But what Dell did for me was providing a clear comparison that to be successful and profitable in the stock market, I do not need to be buying or selling daily. It’s utterly unnecessary. It made me realized that all I need to do to be a successful investor is to be strategic about my selection of stocks and be patient to allow the market time to realize the true value of the stocks that I have selected.

Check out what Stock Screener and Filter that I use to build a solid portfolio