Insights from a Value Investment Seminar

Last night I attended a value investment seminar sponsored by our School of Business here at Villanova. Here were some things I picked up on investing from our speaker:

1.) Look for small-cap companies that are unfavored and have little/no analyst coverage. These companies often have wide discrepancies between their stock price and intrinsic value.

2.) Look for companies with significant insider ownership so that the interests of managers are aligned with those shareholders.

3.) One of the most important metrics to look at when evaluating a company is cash flow/share.

4.) Spin-offs are a classic case to find undervalued companies because companies tend to spin-off underperforming businesses. Once this underperforming business is spun-off, however, managers can freely reinvest as much of their earnings as they want into their specific niche segment and control the amount of capital spending. Thus, the economics of the business can completely change. Further, managers are determined to show their previous firm they can be successful.

5.) The best value investors in the world are your mothers. They continuously filter through coupon books, spend time finding the best deals online, and have an innate understanding of the value of an item. Thus, they know a good price when they see one.