Thursday 15 January 2015

Wisdom on Value Investing: How to Profit on Fallen Angels Summary - Chapter 7

Advantages of Time arbitrage

·         Time arbitrage is the advantages from buying good companies with rising profits at discount prices, and then wait patiently for share prices to rise (i.e., time is your ally).
a.       However, if you buy a company that is eroding in value, and hope for good news to give the shares a boost so you can sell it, time is probably working against you.
b.      I like to get paid while I’m waiting. Look for value first and dividends second. Specifically, look for companies with a history of raising their dividend each year.
c.       Current payments to shareholders and the companies that pay them are a great example of the knowable. As an investor, that’s where you want to be.

·         Have a 3-years mindset:
a.       It takes patience and a willingness to hold on to great companies that may appear to be going nowhere for what may seem like a long time.
b.      Having a three-year mindset prepare you for patience in an investment world obsessed with short term excitement.

·         The three forces that create fallen angels:
a.       Business and economic cycles.
b.      Recoverable calamities (i.e., short term events that cause panic).
c.       Broader market downturn (i.e., widespread panic).


·         Watch for extreme prices – they are not likely to remain that way.




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