The Most Important Questions Every Value Investor Should Ask About a Stock

Once you’re ready to put together a portfolio of value investing stocks, it’s time to begin the research process.  Browne said that the folks at Tweedy, Browne & Company focused on several questions when examining potential value stocks.  These were:

1. What is the outlook for pricing the company’s products?  Can the company raise prices?  How much of that price increase will fall to the bottom line?
2. Can the company sell more?  What is the outlook for units?
3. Can the company increase profits on existing sales?  What is the outlook for the gross profit margin as a percentage of sales?  How much is the gross profit margin expected to increase or decrease as a result in changes in price, mix of business, or the specific costs that make up the cost of goods sold?
4. Can the company control expenses?
5. If the company does raise sales, how much of the increase will fall to the bottom line?
6. Can the company be as profitable as it used to be, or at least as profitable as its competitors?
7. Does the company have one-time expenses that will not have to be paid in the future?
8. Does the company have unprofitable operations it can shed?
9. Is the company comfortable with Wall Street’s earnings estimates?
10. How much can the company grow over the next five years?  How will the growth be achieved?
11. What will the company do with the excess cash generated by the business?  Every dollar of profit not given to the shareholders in the form of dividends will be retained by the company.  What does management intend to do with it?
12. What does the company expect its competitors to do?
13. How does the company compare financially with other companies in the same business?
14. What would the company be worth if it were sold?
15. Does the company plan to buy back stock?

These questions will help you determine whether a stock is undervalued relative to the market’s expectations for future earnings.  This approach has worked wonders for value investors who entrusted their money to Tweedy, Browne.  After fees, Tweedy, Browne & Company has beat the S&P 500 by nearly 2% points per year for 40 years.  That may not seem like a lot, but for someone who saved $10,000 per year, it’s the difference is startling: Someone who invested in the S&P 500 would have retired with $7,670,914 whereas an investor with Tweedy, Browne & Company would have sailed away into their golden years with a personal nest egg of more than $17,790,903.  For most people, an extra $10,119,989 is worth the extra work required to understand stock valuation!

Four principles for the open world

This is a good video explaining how the world is changing and personally I find this very interesting and important.  I would love to find business ideas where we can use the power of the people, knowledge and expertise of people worldwide to develop our ideas and create change.

Don Tapscott: Four principles for the open world

For example:

The Only Way to Become Amazingly Great at Something

Very often you’ll see blog posts or books teaching you to “master” a skill in only 10 days, or 3 days … in fact, it used to be 30 days but the time frame to master something seems to be shrinking rapidly.

I’ve even seen tutorials claiming to teach a skill in just a few hours. Pretty soon we’ll be demanding to know how to do something in seconds.

Instant mastery of skills and knowledge! Hey presto!

Unfortunately, the reality is something a little less magical. Or maybe that’s a fortunate thing.

There’s only one way to become good at something:


    First, you must learn it by reading or listening to others who know how to do it, but most especially by doing.
    Then do some more. At this point, you’ll start to understand it, but you’ll suck. This stage could take months.
    Do some more. After a couple of years, you’ll get good at it.
    Do some more. If you learn from mistakes, and aren’t afraid to make mistakes in the first place, you’ll go from good to great.


It takes anywhere from 6-10 years to get great at something, depending on how often and how much you do it.

Some estimate that it takes 10,000 hours to master something, but I think it varies from person to person and depends on the skill and other factors.

Want to be a great writer? It’s possible to be great within a few years, if you have the God-given talent of Fitzgerald or Shakespeare, but most of us toil for over a decade and are still trying to get better.

We’re still learning, to this day, and if we look back on our first few years of writing — of any kind — we’ll tell you we sucked (for the most part) back then.

Want to be a great blogger? Same deal. I’ve been doing it for almost three years, and I’m still only competent. Gruber’s been doing it for, like, 7 years and he’s still only … well, he’s pretty great by now.

You have to do it, make mistakes, learn, really begin to understand it, and someday, if you stick with it, you’ll be great.

There’s no one who is great at his profession who hasn’t been doing it for at least 6 years — no designer, no programmer, no carpenter, no architect, no surgeon, no teacher, no musician, no artist … you get the point.

I dare you to name one.

Most have been doing it for over a decade, and are still looking to improve.

It takes desire, it takes drive, it takes lots and lots of doing.

So here’s the thing: don’t get discouraged if you’re just starting out. Have fun, like we all did in the beginning.

If you have fun, you’ll learn to love it, and THAT’S when it clicks. When you love something, you’ll want to do it all the time, sometimes late at night and and early in the morning.

THAT’S how you get great.


Find that desire.

Do it, don’t just read about it.

Don’t buy a single product or book or magazine that claims to teach you something in minutes, hours, days. They’re lying to your face, with a hand in your pocket at the same time.

Do it, keep doing it, then keep doing it some more. It’s the only way to get great, but the good news: anyone can do it. It just takes some time and some doing. Hey presto.