How to Pick Stocks UK | Value Investing Explained | The Dhandho Investor
Channel: Financial Madness
Date: 2022-06-20

How to Pick Stocks | Value Investing Explained | The Dhandho Investor
Over the last couple of weeks, I have been doing a fair bit of research and there are two books that I would highly recommend you all to read. 
The first one is a book called Warren Buffett’s 3 Favorite Books: A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations. The second is The Dhandho Investor: The Low-Risk Value Method to High Returns, both amazing reads and what I have learned from the Dhandho Investor will form the basis of today's video.
I am continuing to research as we speak, but I do find myself going down a path that focuses on a particular style of investing and that is called: Value Investing. 

What is Value Investing
The fundamentals of this methodology are that you should only buy a stock when you believe the stock is trading; under its real or what is known as its intrinsic value. Because Companies that are publicly traded have their Share Price influenced by external factors. Speculation and demand for a stock can sometimes over and underinflate the market price which will see it diverge away from its intrinsic value. 

The point I am trying to make is that the Market Price of Stock doesn't necessarily equal the fair price of the stock. So when it comes to Value investing, what we want to be doing is to find stocks that are trading below their Intrinsic Value before we consider buying them. Because eventually the market price will catch up and meet at or close to the fair price.

This is one of the main cruces of Value Investing and I don't want you to start thinking that this is just a numbers game. It certainly is not. 
Dhandho Investor, by Mohnish Pabrai, talks about how YOU should approach investing opportunities by using the Dhandho Framework. He mentions that Most people believe that in order to achieve higher returns, you need to invest in something higher risk, and the book goes through detail as to why this isn't necessarily true.

Chapter Information (How to Pick Stocks UK):
0:00 Introduction
2:24 What is Value Investing?
4:40 Focus on Investing in Existing Business'
5:24 Buy Simple Business'
6:15 Buy Distressed Business' in Distressed Industries
6:35 Buy Business with a Durable Competitive Advantage
7:06 Bet Heavily when the Odds are in Your Favour
7:32 Buy Business at a Discount to their Intrinsic Value
9:09 The Art of Selling Stocks


🔹 Warren Buffett’s 3 Favorite Books: A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations: https://www.amazon.co.uk/Warren-Buffetts-Favorite-Books-Intelligent-ebook/dp/B0085W03FM

🔹 The Dhandho Investor: https://www.amazon.co.uk/Dhandho-Investor-Low-Risk-Method-Returns-ebook/dp/B008L042Q4/ref=sr_1_1?crid=1V2OYZ10FXPHV&keywords=dhandho+investor&qid=1655674754&s=digital-text&sprefix=dhandho+investor%2Cdigital-text%2C53&sr=1-1

🔹Kelly's Formula: https://www.investopedia.com/articles/trading/04/091504.asp

DISCLAIMER - Any advice or (statements perceived to be advice) given in this video and any other videos on my channel are for information purposes only, and do not act as financial advice.  You are fully responsible for your financial decisions. If you are in need of Financial Advice, please seek out a professional advisor. If you are unsure of how to do this, feel free to reach out to me and I am more than happy to guide you.

#investing #stockmarket #valueinvesting