High-performance Value Investing | IntelligentValue.com

   





 

 

 

 

 

 


INTELLIGENTVALUE RESULTS   


OUR VALUE STATEGIES WILL HELP YOU CREATE PERSONAL
WEALTH WITH PROVEN, OUTSTANDING RETURNS


Investing based on fundamental value is an approach that has created thousands of millionaires and dozens of billionaires... and that cannot be said of any other investment approach.

While not everyone has the goal of become a millionaire through investing, while saving for your children's college education or a comfortable retirement, you still might want to put your hard-earned money to work in the same very safe and very high-return investment approach used by smart-money billionaires such as Seth Klarman, Whitney Tilson, or Warren Buffett.  Even if you don't want to commit your entire portfolio to the value approach, as a way to diversify, it is certainly prudent to have at least a portion of your portfolio committed to undervalued equities.

The fact that you have found IntelligentValue.com and are interested in learning about this approach means that you are different from the average investor.  Most investors regularly buy what amounts to a lottery ticket on the latest, hot, 'story stock' featured on TV or in the press.  Instead of going down that speculative path and gambling on unpredictable future outcomes, you are attracted to the clear and compelling logic behind the value approach to investing and may soon be able to count yourself among the large family of investors who have grown wealthy from its application.

On this page, we'll examine the results of the our model portfolios since 2004, and you'll learn how the tools IntelligentValue.com provides will help you quickly and easily incorporate a highly profitable, value-based component into your overall investing strategy. 

OUR TWO VALUE-BASED MODEL PORTFOLIOS
GENERATE EXCEPTIONAL PROFITS



DEEP VALUE PORTFOLIO

 


Our DEEP VALUE Portfolio identifies companies that are selling at a dramatic discount to their intrinsic value.  This is frequently a result of investor disenchantment with a company's industry or perhaps a particular company that has had an earnings miss or other underperformance in the recent past.   The emotional nature of investors frequently over-punishes decent companies during a selloff as their price is swept downward with other stocks in an industry.  At other times, the mispricing is an emotional overreaction to particular company's recent release of bad news.

These situations are perfect opportunities for value investors to take advantage of the capricious nature of markets.  We establish a value based on the businesses of these companies taking into consideration information that is more realistic and less optimistic than is customary on Wall Street. In other words, we value thes business then subtract to reach a significant margin of safety.

In our DEEP VALUE Portfolio, we identify companies that are selling on the public equity markets at a discount to their book value, cash, current assets, cash flow, free cash flow, sales, gross profits, operating income and other value-based criteria which our research shows is highly correlated with future stock price performance. 

Our DEEP VALUE Portfolio confirms an approach that has created many billionaires: buy cash flow and cash-flow-generating assets when they are temporarily selling at a deep discount. The DEEP VALUE Portfolio approach is similar to the approach of famous value investors Benjamin Graham, Seth Klarman, or Walter Schloss.  However, we add the additonal enhancement of choosing these stocks when technical analysis tells us they are ripe for an upturn.

Here's a current summary of the DEEP VALUE Portfolio's results:

DEEP VALUE PORTFOLIO 

ANNUAL RETURN MAR 9, 2009 - JUNE 4, 2017: 102.40%

SUMMARY Portfolio Results

Portfolio Total Return: 31,771.40%  Benchmark (Russell 2000) Total Return: 302.83%
Portfolio Annualized Return:
102.40%   Winners: 66.41%    Avg Return: 24.66%
Biggest Winner:
261.12%    Biggest Loser: -28.06%    Max Drawdown: -26.54%  
Avg Hold Time: 3.26 months     Sharpe Ratio: 1.41


Note: All statistics include dividends and an $8 commission both ways on stocks or a $4 commission both ways on ETFs.
 
For additional details on the DEEP VALUE Portfolio's performance, please click here for Part 2 of the Results


RELATIVE VALUE PORTFOLIO

 


For the RELATIVE VALUE Portfolio, we are scouring the mid-to-large capitalization ($1B+) universe of stocks, represented by the Russell 1000, for undervalued opportunities. In this portfolio, we are not looking for stocks that are beaten down in price, but rather, quality companies that are selling at a relative discount to their peers. 

We do not apply maximum Price-to-Asset ratios in this portfolio, but simply purchase the top-ranked stocks that are selling inexpensively when we consider a variety of proven fundamental factors as a whole. The RELATIVE VALUE Portfolio approach is similar to that of famous value investors Warren Buffett or Whitney Tilson.

Here's an up-to-date summary of the RELATIVE VALUE Portfolio's results:

Relative Value Portfolio 

ANNUAL RETURN MAR 9, 2009 - JUNE 4, 2017: 64.12%

SUMMARY Portfolio Results

Portfolio Total Return: 5,806.80% Benchmark (S&P500) Total Return: 267.87%  
Portfolio Annualized Return:
64.12%    Winners: 70.34%   Avg Return: 12.61%  
Biggest Winner:
431.01%     Biggest Loser: -28.41%    Max Drawdown: -23.12% 
Avg Hold Time: 3.16 months    Sharpe Ratio: 1.32   

   

Note: All statistics include dividends and an $8 commission both ways on stocks or a $4 commission both ways on ETFs.


IntelligentValue.com will provide you with a treasure trove of these undervalued companies.  The primary focus of our business is to identify quality companies that are selling at a discount to their intrinsic value.  We are not talking about highly volatile over-the-counter or penny stocks. We select our undervalued stocks from a universe of substantial companies from both the Russell 2000 Index (DEEP VALUE Portfolio) and the S&P 400 and S&P 500 Index (RELATIVE VALUE Portfolio). 

Of these two groups of stocks, we also require that each stock have high liquidity for our investment.  This liquidity (Price x Volume) insures that you can enter or exit your positions at the time of your choosing, not at the time of choosing of the rare buyer, as can occur with low-liquidity stocks.

For additional details on the RELATIVE VALUE Portfolio's performance, please click here for Part 2 of the Results

 

 

15 Day FREE Trial

 

 

EXAMPLES OF OUR STOCK SELECTIONS  

The following snapshot provides a sample of the type of companies we select for our portfolios, our selection criteria, and our results.
 

1) ATLAS AIR WORLDWIDE HOLDINGS (AAWW)


On March 22, 2015, we recommended the purchase of Atlas Air Worldwide Holdings (AAWW) and bought it at the market open the next day at a price of $47.25/share.  Then on April 12, 2015, we published an analysis of AAWW and reiterated our buy recommendation.

AAWW initially appeared on our screens because of its excellent array of deeply undervalued fundamental criteria. Take a moment to review these outstanding ratios and statistics compared to the company's peers:

BASICS
Market Capitalization:
$1.08 billion
Revenues: $1.80 billion
Income: $106.80 million
Book Value: $1.42 billion

VALUE RATIOS
For these fundamental ratios, lower is better:

Price/Book Value: 0.76 (Industry Median: 3.16)
Price/Tangible Book Value: 0.81 (Industry Median: 5.64)
Price/Sales: 0.61 (Sector Median: 1.09)
Price/Cash Flow: 4.55 (Industry Median: 16.90)
Price/Earnings: 10.29 (Industry Median: 23.63)
Market Capitalization/Operating Income: 6.14

VALUE PROPOSITION
AAWW meets our minimum requirements for a deep discount to intrinsic value with its Price/Book Value ratio of just 0.76, its Price/Sales ratio of 0.61, and its Market Capitalization/Operating Income ratio of just 6.14. When any one of these ratios rise to what our stock-selection system has determined is 'full value,' the stock will be sold.

This discipline of buying when a stock is selling at a deep discount to a pre-determined intrinsic value and only selling when the stock has reached that intrinsic value, is the essence of Graham and Dodd-style deep value investing. However, whenever we can, we add the additional requirement of buying at an optimum entry point and selling at an optimum exit point, as determined by technical analysis. This supplemental aspect of our approach dramatically enhances the returns we can achieve.

April 12 profile of AAWW, we said, "Based on the fundamental technical analysis tenet of buying when a stock is oversold and bouncing from a support level, AAWW's price chart is now presenting an optimum entry point. When combined with well-established value fundamentals, this stock presents a high probability investment opportunity. Atlas Air Worldwide is a STRONG BUY."

In its April 30 earnings announcement, AAWW shocked investors with exceptional results. First-quarter profit rose to $29.2 million from $4 million a year earlier, with per-share earnings rising to $1.18 from $0.32, well above analyst's expectations. Sales rose 10% to $445 million.  The stock price gapped sharply higher following the announcement, and robust gains continued last week.

The chart below shows AAWW's current price picture in the top window, along with our Intelligent Price Oscillator™ in the lower window. As you can see, AAWW did a double bounce off of the support line we identified in our April 12 analysis. The take-off we anticipated was delayed by a couple of weeks, but it certainly did take off!

Along with the fundamental analysis, we presented the following price chart which included our Intelligent Price Oscillator™ in the lower window:



 
2) DFC GLOBAL CORP (DLLR)


We purchased DFC Global (DLLR) on February 10, 2014 for $6.53 per share for our DEEP VALUE Portfolio.  DLLR had been in a downward slide for the prior six months based primarily on what we felt were short-term issues. 

However, our value analysis of the company's financial statements showed substantial discounts to fair value. This included a low Price/Book Value Ratio of 0.64 (industry median = 1.89) and a Price/Sales Ratio of just 0.27 (sector median = 3.04).  The company's price was also just 1.62 times the cash on its balance sheet (more financial ratios below).  Because of a temporary earnings shortfall, investors eschewed DLLR and we felt the price of the stock was overdone to the downside.    

Frequently in this situation, our DEEP VALUE Portfolio companies are acquired by a larger suitor who sees the opportunity to purchase a cash-flow generating asset at a deep discount to the value of those assets.  We identify the same sound business attributes when we look for IntelligentValue investment opportunities.

Here were the company's important value-based fundamentals at the time of the purchase:

Market Capitalization: $293M
Sales: $1.08B

FINANCIAL STRENGTH RATIOS
(Lower is better)
Price/Sales:
0.27
Next Year's Projected P/E Ratio: 7.09
Price/Book Value Ratio: 0.64
Price/Cash Flow: 11.56
Price/Free Cash Flow: 1.48
Price/Cash: 1.62

With undervalued fundamentals like these, what's not to like?  The company had temporary losses in the earnings column, but consistently positive cash flow.  Most investors don't realize that earnings growth is a contrary indicator of future stock-price performance while solid cash flows and undervalued assets are a coincident indicator.  The company could be purchased for just 1.62 times the cash on the balance sheet and 0.64 times the book value, with a price that was only 1.48 times the company's Free Cash Flow.  This stock was a raging buy when we purchased it.

RESULT

Many companies selected as investments by IntelligentValue are also noticed by acquisition-minded companies for the same reason we notice them: they are great bargins relative to their economic value.  On April 3, 2014, it was announced that DLLR had agreed to be acquired by a private-equity firm Lone Star Funds for $1.3 billion in cash.  We sold our shares at the market open on April 7 for $9.46/share, a profit of 44.80% in just two months.  This return is not unusual, because the average profit per stock for the DEEP VALUE Portfolio is 40.46%.

The chart below shows DLLR's price trend at the time we purchased the stock:


DFC Global's (DLLR) chart looks like a downward-spiralling nightmare, but we saw a decent company and a deeply oversold stock. 
DLLR was acquired by a private equity firm two months later and IntelligentValue.com subscribers profited a nice 44.5%.



15 Day FREE Trial


WHY DOES OUR VALUE INVESTING APPROACH
PRODUCE SUCH OUTSTANDING RETURNS?

 

Value investing is the concept of buying a stock for less than the share price of a company's intrinsic value, then selling in the future at full value or more.  In the words of Warren Buffett, value investing is like "buying a dollar bill for 50 cents."   It's bargain-hunting, classic 'buy low and sell high.'   However, the critical element to its success is to remove emotional decisions from the process by quantifying the selection and both the entry and exit points of the equities selected. 

Therefore, we try to take the biased, emotional, human element out of the equation as much as possible.  Since 2004, the success of our quantitative stock-selection system has been proven in successful, long-term use by our subscribers.  We are proud to have many members who have been with us for the duration; since IntelligentValue's launch in 2004.

Hoping for growth is not an investment strategy: The vast majority of investors put their money into stocks they think will grow in the future.  By doing this, they hope the value of their stock and their investment/retirement portfolio will also grow.  However, any method that depends on a stock's price growth based on consistently increasing future profits is purely speculative, and if we are honest, just wishful thinking. The volatile years since 2000 have been a painful reminder of this fact as overall stock prices have plummeted by 50% not once, but twice.  Investors who were not in value-based stocks experienced a terrifying rollercoaster ride and many have not returned after selling at the bottom.

Instead of this quixotic, wishfully-hoping for earnings-growth approach taken by the majority of investors, we take another approach. We identify and purchase cash-generating assets priced below their current, intrinsic value (as opposed to a guess about their future value), then sell when the asset has regained full value.  You rarely find a situation where private parties will sell a solidly valuable asset at a discount of 30% - 70% of the asset's market value.  Just consider the purchase of real estate, a rare automobile, farm, or a private business. You'll almost never get a chance to buy one of those properties at a significant discount unless it is encumbered by complications. 

However, you can regularly buy assets in the U.S. public stock market when they are temporarily beaten-down (from investor fear, disregard, or disaffection). Then you can easily sell those assets later - in the same marketplace and at the time of your choosing for a sizable profit as other investors inevitably discover the price discrepancy.

That approach requires these essential elements: removal of the influence of what Buffett calls the "super-contagious emotions that swirl about the marketplace." A rigorous quantitative discipline and consistent identification of undervalued companies founded on proven, asset-based fundamentals provide us with these incredible returns year after year. 

IntelligentValue.com has consistently beaten the market by a wide margin. Our portfolios have double and triple-digit annual returns!

At IntelligentValue, I really get an understanding as to why we are buying or selling and what factors are affecting the markets; in other words, getting real value added with an amazing emphasis on transparency and accuracy."  
- David B., Mexico City, Mexico

See what our subscribers are saying about IntelligentValue...

All current portfolio holdings, closed positions, historical records, past VALUE ALERT Newsletters,
and current Intelligent Market Timing charts are available to new subscribers in the Member's Area.

get FREE INSTANT ACCESS

  Start Now!

15 Day FREE Trial
 


Get instant access to a proven system that achieves outstanding investment returns. IntelligentValue.com has been producing market-beating performance since 2004.   Isn't it time you got safe, outstanding performance that can only be achieved through value investing?  Get a 15-Day FREE Trial