[REPLAY] Deep Value Investing w/ @BuyCheapAndPray and @theotheraharon
Apr 11, 2025
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Join Ina, known as @BuyCheapAndPray, a contrarian deep value investor with a global outlook. They dive into the essentials of deep value investing, contrasting it with typical strategies and sharing lessons from past missteps. Discussions include the art of portfolio construction and the balance between risk and reward. Ina discusses the emotional aspects of investing and the significance of thorough research. Tune in for insights on undervalued stocks and strategies for adapting to market shifts!
The podcast emphasizes the philosophy of achieving high risk-adjusted returns through a strong community and continuous learning in investing.
Investors discuss contrasting strategies like deep value investing and concentrated portfolios, highlighting the importance of risk assessment and humility in management.
A thorough stock selection process is vital for identifying deep value opportunities, blending quantitative metrics with qualitative insights for optimal returns.
Deep dives
Investment Philosophy and High Retention Rates
The philosophy of achieving high risk-adjusted returns through consistent learning and enjoyment in investing is central to the approach discussed. This philosophy is backed by impressive retention rates, suggesting that a strong community and unique research offerings contribute to member loyalty. The community comprises both experienced professionals and motivated retail investors, united by their passion for investing and self-improvement. This collective mindset creates an environment conducive to growth and learning in the investment realm.
Deep Value Investing Strategies
The conversation highlights two distinct investing approaches: concentrated portfolios and deep value strategies. The deep value investing method involves diversifying investments across hundreds of stocks, focusing on those perceived as undervalued or 'cheap.' Investors share insights on how they adapt strategies inspired by successful figures like Keith Gill, emphasizing the importance of asset-based metrics and low weight allocations for high-risk stocks. Each investor reflects on how they evolved their approaches through experience, acknowledging past mistakes and the benefits of humility in portfolio management.
Research and Stock Selection Process
A comprehensive stock selection process is crucial in identifying opportunities for deep value investments. Investors utilize a mix of screening tools and valuation metrics, focusing on parameters like tangible book value and price-to-earnings ratios. They assess companies globally, remaining open to opportunities in unpopular markets while being cautious of potential pitfalls. This method allows for a vast universe of potential investments, but emphasizes a careful examination of each candidate’s fundamentals before committing capital.
Portfolio Construction and Risk Management
Portfolio construction strategies vary significantly, with some investors maintaining large numbers of positions while others prefer more concentrated portfolios. The diversification approach enables investors to mitigate risks associated with individual stocks, thus making it easier to absorb losses without significant stress. Weighting strategies are primarily guided by an assessment of risk and upside potential, with lower weightings for higher-risk assets. This tactic ensures that investors can capitalize on significant upside while limiting exposure to any single investment.
Challenges of Investing in Cheap Stocks
Many investors acknowledge the paradox of investing in stocks deemed cheap, often facing skepticism due to their distressed conditions. The conversation notes that while cheap stocks can present lucrative opportunities, they require thorough analysis to confirm long-term viability. The importance of selling a position when it no longer meets the original criteria is emphasized as a key aspect of maintaining a disciplined approach. Sustainable returns are achieved by combining quantitative metrics with qualitative assessments, enabling investors to navigate the complexities of market sentiment.
I hope you guys enjoy my Twitter Spaces conversation on all things Deep Value Investing.
Big thanks to my two co-hosts @BuyCheapAndPray and @theotheraharon for making this Spaces worth the listen.
We cover a ton of ground during the conversation, including:
Position sizing
Research process
Portfolio construction
Investment criteria
Lessons learned from mistakes
Deep value mentors/idols
And more.
You're going to love this episode.
Finally, a big thanks to our sponsors for making this episode happen.
Mitimco
This episode is brought to you by MIT Investment Management Company, also known as MITIMCo, the investment office of MIT. Each year, MITIMCo invests in a handful of new emerging managers who it believes can earn exceptional long-term returns in support of MIT's mission. To help the emerging manager community more broadly, they created emergingmanagers.org, a website for emerging manager stockpickers.
I highly recommend the site for those looking to start a stock-picking fund or just learning about how others have done it. You'll find essays and interviews by successful emerging managers, service providers used by MIT's own managers, essays MITIMCo has written for emerging managers, and more!
TIKR
TIKR is THE BEST resource for all stock market data, I use TIKR every day in my process, and I know you will too. Make sure to check them out at TIKR.com/hive.
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