Editor’s note: This article is meant to introduce David J. Waldron’s new Marketplace service Quality + Value Strategies.
On behalf of the Seeking Alpha Marketplace team, I am excited to announce the official public launch of Quality + Value Strategies. Using a proprietary analysis to uncover fundamental value, our mission is to inspire members to build and maintain portfolios of the shares of quality enterprises that fund life’s essential milestones.
As part of the official public launch, between now and May 31, 2022, in addition to Seeking Alpha’s 14-day free trial, as founding members of Quality + Value Strategies, new subscribers will receive a 55% savings on an annual subscription or just $215 versus the $40 month-to-month option.
Why Quality + Value Strategies?
For some background, in 2009, I transitioned to bottom-up value investing after struggling as a top-down growth investor for several years. By modeling the guiding principles of legendary investors, such as Warren Buffett, Benjamin Graham, Peter Lynch, and Howard Marks, I began to pick stocks driven by their influential collective wisdom, which became the foundation of Quality + Value Strategies.
Buffett on profiting from the magic of compounding:
The ideal business is one that earns very high returns on capital, and that keeps using lots of capital at those high returns. That becomes a compounding machine.
Graham on owning stocks protected by a wide margin of safety:
Confronted with a challenge to distill the secret of sound investment into three words, we venture the following motto, ‘Margin of Safety.’
-Benjamin Graham, The Intelligent Investor (New York: Harper Collins, 1949)
Lynch on keeping investing super simple:
Never invest in any idea you can’t illustrate with a crayon.
-Peter Lynch (with John Rothchild), Beating the Street (New York: Simon & Schuster, 1993, 1994)
Marks on investing in present value instead of speculative growth:
The choice isn’t really between value and growth but between value today and value tomorrow. Growth investing represents a bet on company performance that may or may not materialize in the future, while value investing is based primarily on the analysis of a company’s current wealth.
-Howard Marks, The Most Important Thing (New York, Columbia University Press, 2011)
As a result of my investor reinvention over 12 years ago, our concentrated family portfolio of the common shares of quality enterprises has outperformed the S&P 500 based on an equal-cap weighted average total return per holding during the same periods. I was fortunate to discover first-hand how value investing prevails through all market cycles.
Acquiring Buffett’s magical compounding, Graham’s three-word secret, Lynch’s crayon metaphor, and Marks’ growth vs. value juxtaposition debunked my previous reliance on deep-dive analysis paralysis, business modeling overkill, and foolish attempts at predicting specific future outcomes when selecting individual stocks. As a result of my renewed approach, I transitioned from an underperforming, near-sighted stock trader to a market-beating, far-sighted company investor.
I shared the experience as a case study in my fourth book, the international-selling Build Wealth With Common Stocks. As a veteran author on Seeking Alpha, I am excited to bring the value investing ideals of thought, discipline, and patience to Quality + Value Strategies to assist subscribers in building life-changing portfolios.
Checklist Approach to Quality Value Investing
My checklist-based approach to stock-picking generates an actionable investment thesis that summarizes why I rate the company and its stock a buy, hold, or sell. My easy-to-read and understand research reports examine the value proposition, shareholder yields, fundamentals, valuation multiples, downside risks, and potential catalysts.
- The value proposition is the competitive advantage that a company’s products or services offer its customers compared to the industry, sector, or marketplace.
- As part of my due diligence, I average the total shareholder yields on earnings, free cash flow, and dividends to measure how a targeted stock compares to the prevailing yield on the 10-Year Treasury benchmark note. In other words, what is the equity bond rate of the common shares?
- I then explore the fundamentals, uncovering the performance strength of its senior management, emphasizing revenue growth, net profit margin, return on equity, and return on invested capital.
- I rely on four valuation multiples to estimate the intrinsic value of a targeted quality enterprise’s stock price. The model reflects market sentiment proximate to the financial vertical of sales, earnings per share, and cash flow, plus enterprise value to operating earnings.
- When assessing the downside risks of a company and its common shares, I focus on five metrics that, in my experience as an individual investor and market observer, often predict the potential risk/reward of the investment. The research emphasizes the economic moat, short- and long-term debt coverage, volatility, and market sentiment, including short-seller interest.
I assign each broad checklist metric a bullish, neutral, or bearish weighted rating. In contrast, the downside risk ratings are above average, average, below average, or low. My recommended picks bias toward below-average and low-risk profiles.
Our family portfolio has outperformed the S&P 500 by overachieving on the down market days more often than in upmarket sessions. I believe this is a crucial, mostly overlooked element of profitable common stock investing.
Despite my overall skepticism of specific predictive analysis, my reports conclude with potential catalysts that would confirm or contradict my investment thesis. Hence, readers get balanced final thoughts of an otherwise asymmetric analysis.
Nonetheless, the buy, hold, or sell investment thesis is based on a qualitative and quantitative evaluation of the enterprise’s present wealth and the stock price’s current value. Quality companies whose shares are trading at reasonable prices earn buy ratings; expensive stocks of enduring companies receive hold ratings, while poor quality enterprises rate as sell or avoid regardless of valuation.
Quality + Value Strategies Investor Profile
Although Quality + Value Strategies welcomes every investor to participate and benefit, the platform best serves the following pre-retirement retail investor:
An everyday investor who has a keen interest in the value investing model of buying the common shares of excellent businesses when trading at reasonable prices. The investor seeks to open or maintain existing personal brokerage or tax-deferred accounts and needs inspiration in structuring and managing their portfolio. In their quest for lesser risk, lower cost investing, they seek an affordable, value-added subscription service.
The primary feature of Quality + Value Strategies is subscriber-exclusive educational course modules released monthly on various topics of the value investing paradigm, including interactive summaries and voluntary assignments to inspire thought and discussion.
Individual investors often build portfolios to finance their life’s essential milestones, such as buying a home, paying college tuition, underwriting a hobby, sponsoring a wedding, starting a business, or enjoying a comfortable retirement. Thus, I assist members in discovering how to keep investing super simple by focusing on the more tangible present value instead of speculative future price or growth targets. And then practice the art of thought, discipline, and patience by taking advantage of the magic of compounding, protected by a wide margin of safety to fund those milestones.
Member-Exclusive Actionable Content
In addition to the investing course modules and advance copies of my research reports, Quality + Value Strategies’ featured content includes subscriber-exclusive real-time portfolios supported by user guides and a glossary, plus a member-centered chat room.
- The Concentrated Portfolio replicates my market-beating family portfolio.
- The Expanded Portfolio includes companies researched, recommended, and published but not currently part of our concentrated family portfolio.
- A User Guide for the real-time portfolios, plus a Glossary of investing terms for reference.
- Interactive Marketplace Chat Room exclusive to subscribers to pursue and maintain collaboration with like-minded value investors.
Quality + Value Strategies greets members with a menu of actionable content, including Getting Started articles such as the new member welcome and service primer, plus the portfolio’s user guide mentioned earlier. In addition, Investing Resources encompasses direct access to the real-time portfolios, the investing glossary, and free access (no embargo) to my Premium articles on Seeking Alpha dating back to 2013, including 23 Editors Picks.
I aim to release 1-2 primary tickers research reports per week and a new course module monthly. The chat room is available to members 24/7. More importantly, subscribers can send me a direct message any time of the day, night, or a weekend with questions, suggestions, and comments. To be sure, Quality + Value Strategies is a hands-on service. Although I cannot provide personal financial advice per securities laws and regulations, I cherish the opportunity to interact with members one-on-one and as a group.
Invest With Thought, Discipline, and Patience
Do-it-yourself everyday stock investors can beat the market or their investment goals over time by sticking to a simple menu of time-tested, winning investment principles, strategies, and practices. To paraphrase baseball legend Yogi Berra, investing is ’90 percent half’ common sense. The ‘other half’ is discipline and patience.
The more profitable approach to retail investing is putting quality before speculation. Disciplined investors reject near-sighted trading schemes that support controversial, unproven investment vehicles with limited utility for hopeful-although improbable-quick financial gains.
Disciplined investors learn to stop placing bets on faceless stocks and instead invest in quality companies. This original concept of trading equities facilitated willing participants to take affordable partial stakes in publicly traded companies. I believe that approach remains the ideal model for the retail investor.
Patience is the scarcest and thereby most valuable commodity available to common stock investors. Patient, informed investors have a far greater chance of getting rich slow than getting rich fast and getting rich slowly is better than not at all.
As we navigate through this current market cycle of unpredictability-aren’t they all-remember that thoughtful, disciplined, and patient investors seldom lose money outside of the occasional market meltdown. Although good and evil in the world are everlasting, as investors, we should remind ourselves that common sense, a commitment to quality at value, and taking the long view often prevail through all market cycles.
If you’re reading this via Seeking Alpha’s mobile app, and want to preview the service right now, go to seekingalpha.com and enter “Quality + Value Strategies” in the site search to visit the Marketplace Service checkout page.