Investing: How I Consistently Beat The Stock Market

By taking this lecture, you will get acquainted with stock screening tools i.e. software that filters out the companies that satisfy specific constraints that you can define up front. This way, you can identify the couple of businesses that are really worthy of researching more profoundly, and hence, you can save yourself a decent amount of time.

This lecture shows you several ways of how you can outsource and hence minimise the screening effort.

In this lecture, you'll learn how to start analysing a business from a high level perspective, and get a good starting point for building your further analysis on.

- Getting acquainted with the company's fundamentals (financials, operating metrics,...) through Morningstar

- Develop an understanding of the company's products, markets & values on the company website

- Develop a more critical understanding of the company on several levels via the SeekingAlpha platform

- Getting a sense of the actual environment of the company through news articles

- Reading the annual reports

In this first lecture around Value Investing, we take a closer look to the "father" of value investing: Benjamin Graham.

This lecture discusses the seven criteria a company needs to pass in order to be investment worthy from a defensive value investor's point of view:

1) Adequate size of the company

2) Sufficiently strong financial condition

3) Earnings stability

4) Dividend stability

5) Earnings growth

6) Moderate Price to Earnings

7) Moderate Price to Book

In this lecture, we'll take a closer look to the seven Graham criteria applied to a practical example for Apple. Make sure to download the template in the download section.

In this lecture, you'll become acquainted with the background of one of the world's most famous investors: Warren Buffett. We'll also take a closer look to how his initial portfolio performed over its first decade.

Warren Buffett has at least four famous investing gurus as his mentors, who taught him several investment principles that he still uses today:

- Circle of Competence

- Focus investing

- Paying a fair price for great companies instead of always trying to buy companies below intrinsic value

- Consistency in growing profits

- ...

- Why the business should be easy to understand

- The Circle of Competence concept

Consistent profit margins are more difficult to attain than one might think, due to economic laws.

Buy companies that you believe will be successful & profitable for the long term

Look at steady track records

Look for companies that have big moats i.e. large & sustainable competitive advantage(s). Moats can be obtained through any of the following:

- Intangible assets like Brands

- Intangible assets like Patents

- Regulation

- Cost advantages

- Switching costs

- Network effects

In this lecture, we take a closer look at how the company's management behaves when allocating its capital. Does management allocate its capital rationally?

- If the business can reinvest its earnings at a return higher than its cost of capital...then it should reinvest its earnings

- What if the business can only reinvest its earnings at or below its cost of capital

It is important that management communicates openly and candidly towards its shareholders:

- Does management report financial performance fully and genuinely?

- Does management explain why incurring short term losses is necessary to win in the long term?

- Does management exhibit honest explanation, rather than excess optimism?

As managers typically are unwilling to look foolish in the short (quarterly) term, there is a lemminglike tendency of corporate management to imitate the behaviour of other managers, no matter how silly or irrational that behaviour might be. This lecture explains why this tendency exists, and why and how you as an investor should try to find a company that is managed by executives who resist this imperative.

According to Buffett, two of the most important financial metrics that point to an extraordinary business with a moat, are Return on Equity (ROE) and Return on Invested Capital (ROIC). This lecture explains these two metrics and provides illustrations as to why Buffett bought specific companies.

Owner earnings are the net cash flows that the owners can expect to receive over the lifetime of the business.

Owner earnings per share = dividends per share + change in book value per share

It is not enough to increase sales over time, sales must be converted in consistent profit margins.

The one dollar premise requires that the company has created at least one dollar of market value for each dollar retained and reinvested in the company.

This section explains how to value a company. The valuation of a business is based on John Burr Williams' definition i.e. the value of a business equals the total of net cash flows (owner earnings) that are expected over the life of the business, discounted at an appropriate discount rate. The different components are discussed throughout the subsequent lectures.

A company's projects and investments should all be evaluated against its cost of capital. Only if the project's return is higher than the company's cost of capital, it makes sense from a financial point of view to execute the project.

To value a business, the total of net cash flows expected over the life of the business, have to be discounted at an appropriate discount rate. This discount rate is the weighted average cost of capital or WACC. This lecture explains both high level and in theoretical detail how the WACC is calculated and what it consists of.

To value a company, two things are needed: the WACC and the expected cash flows over the lifetime of the business. This lecture explains how the cash flows can be obtained and how they should be modelled against the WACC to obtain a reasonable value range for the company.

Make sure to download the template in the download section.

In this lecture, some other valuation methods are discussed, such as the Gordon Growth Model.

This lecture introduces you to the most relevant technical analysis basics such as:

- upward and downward trend channels, resistance and support

- (reverse) head and shoulder pattern

- double top and double bottom

- horizontal support

- rising / falling wedge

This lecture explains the difference between the three families of technical indicators and provides practical examples of the most relevant ones, such as the MACD and the RSI indicator.

Deciding to invest and how to build your portfolio.

Every once in a while, re – evaluate your investments based on the exact same principles you applied in deciding whether to buy them

- How have the underlying business characteristics evolved? Does the company still possess that attractive moat? Has the company become prone to significant competitive forces? How is the industry evolving?

- How has price evolved? Is the company still undervalued, adequately valued, or has it become extremely overvalued?

- How is its financial position? Has it taken on a significant debt load? How have owner earnings evolved?

- Is management still shareholder friendly? Has management changed over the past period?

- Is the proportion that a specific investment constitutes in your portfolio still justifiedor has it become too large?

- Are there companies that are currently that overvalued that they pose too much downside risk to your portfolio?