WEBVTT 00:03.170 --> 00:09.020 Hey Guys welcome to Module 1 and this module I'll help you understand quickly how the value investing 00:09.020 --> 00:11.330 strategy works in the real world. 00:11.330 --> 00:17.120 We'll dive into what exactly value investing is how it works and I'll show you three simple steps to 00:17.120 --> 00:22.780 implement this strategy so that you can profit from the stock market and grow your money. 00:22.790 --> 00:26.920 OK now let's get started. 00:26.930 --> 00:29.720 So what exactly is value investing. 00:29.750 --> 00:35.180 Value Investing is simply an investment strategy where stocks are selected that trade for less than 00:35.180 --> 00:37.070 their intrinsic value. 00:37.070 --> 00:38.910 So what does that mean. 00:39.230 --> 00:45.470 Intrinsic value here is a real or true value of a company by doing value investing you simply invest 00:45.470 --> 00:50.450 in stocks that are currently undervalued or become temporarily cheap. 00:50.480 --> 00:55.880 Value Investing is driven by the idea that there are ways to benefit financially from the events that 00:55.880 --> 00:58.820 cause stock market prices to swing up and down. 00:59.240 --> 01:04.070 So when there are rumors or bad news about a company its stock price will drop. 01:04.070 --> 01:10.160 And as a value investor you simply take advantage of these events and buy the company's stock at a much 01:10.160 --> 01:11.280 lower price. 01:13.680 --> 01:17.820 On one level a stock's value is reflected in its current market price. 01:17.820 --> 01:22.650 Since the market price indicates how much investors are willing to pay for a stock at any given time 01:23.130 --> 01:25.760 it indicates the stock's market value. 01:26.100 --> 01:32.310 But the key point to note in value investing is that a stock market value is not the same thing as its 01:32.310 --> 01:35.430 fundamental or intrinsic value. 01:35.430 --> 01:41.670 Sometimes businesses can become temporarily popular or unpopular for a variety of reasons that have 01:41.670 --> 01:44.160 little to do with the true worth of their revenues. 01:44.250 --> 01:47.290 Net assets or their future income potential. 01:47.640 --> 01:53.940 So as a value investor our job is to find a company's true value and compare it with the current market 01:53.940 --> 01:58.050 price so we can determine if the stock is worth buying or not. 02:00.410 --> 02:05.420 When a company stock is undervalued it means that it's selling at a price well below the value of its 02:05.420 --> 02:08.300 current and predicted cash flows. 02:08.360 --> 02:13.430 For example a stock is selling at three dollars and 21 cents a share and you find that it's actually 02:13.430 --> 02:16.160 worth $5 and 67 cents a share. 02:16.400 --> 02:21.770 So this simply means this stock is undervalued and it's a good buying opportunity because you know that 02:21.770 --> 02:25.190 the stock price will likely go up in the near future. 02:25.190 --> 02:33.230 So you simply buy low at $3 and 21 cents a share and then sell high at $5 and 67 cents a share. 02:33.290 --> 02:42.220 For example in this case you can make around $2 and 50 cents a share in profit at the same time. 02:42.250 --> 02:48.520 A stock that's overvalued is one that's selling at an inflated price well beyond its true value or its 02:48.520 --> 02:50.680 predicted cash flows. 02:50.680 --> 02:57.370 For example you find a stock that selling a $5 in 67 cents a share and after applying some valuation 02:57.370 --> 03:02.550 techniques you know that this stock is only worth three dollars and 21 cents a share. 03:02.590 --> 03:09.050 So this means it's overvalued or expensive Dubai there are chances that its price will drop in the near 03:09.050 --> 03:10.000 future. 03:10.010 --> 03:13.610 So we simply sell it or avoid buying it. 03:13.690 --> 03:19.600 You see value investing can tell you exactly whether or not a stock is a worthwhile investment with 03:19.600 --> 03:20.760 this information. 03:20.860 --> 03:25.900 You can easily profit from the stock market. 03:25.920 --> 03:32.640 So what is the smartest strategy for buying and selling stocks as a value investor will buy on bad news 03:32.940 --> 03:35.100 and sell on good news. 03:35.100 --> 03:36.110 Do you know why. 03:36.480 --> 03:39.360 Well most investors will do the opposite. 03:39.390 --> 03:42.810 They buy on good news and sell on bad news. 03:42.900 --> 03:49.530 You know that's risky because they can easily buy an overvalued stock which likely drops in value for 03:49.530 --> 03:51.500 playing safe with the stock market. 03:51.510 --> 03:55.350 Why don't we wait until there's some rumors or bad news. 03:55.350 --> 04:01.680 These events will likely cause the stock price to drop temporarily and the stock can easily become undervalued 04:02.340 --> 04:09.870 and then we can buy low sell high for making an easy profit and similarly we'll sell on good news because 04:09.870 --> 04:16.110 chances are the stock price will surge temporarily during these events and sometimes become overvalued. 04:16.440 --> 04:21.980 We simply sell at a high price and take the profit. 04:21.990 --> 04:28.620 So here's a quick tip if an undervalued company is financially strong with a solid profit history and 04:28.620 --> 04:35.070 promising future earnings its market price is very likely to rebound after a temporary downswing caused 04:35.070 --> 04:38.070 by investor fear or disfavor. 04:38.130 --> 04:44.870 This means solid companies with efficient operations and strong financial performance are always winners. 04:44.880 --> 04:48.900 We don't care when their stock price drops because of bad news or rumors. 04:48.900 --> 04:54.120 Their financial performance proves that they can survive market downturns and their market values will 04:54.120 --> 04:58.350 likely go back up and reach closer to their intrinsic values. 04:58.350 --> 05:04.620 So to be a profitable value investor All you need to do is find companies with a strong fundamental 05:04.620 --> 05:07.770 performance in the next lecture. 05:07.790 --> 05:11.390 I'll teach you how to implement the value investing strategy.