Value etf’s that actually contain value?

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Dug8498
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Value etf’s that actually contain value?

Post by Dug8498 »

If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
Valuethinker
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Re: Value etf’s that actually contain value?

Post by Valuethinker »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
There are a number of definitions of Value. The "bad companies for a reason" often fit within the Ben Graham criteria.

I am not US based so I can't use US funds, so can only give you a few steers as to where to look.

If you look at factor funds or ETFs which are Low Volatility or Quality tilted, you will find more of the classic Warren Buffett type companies: stable profit margins, high barriers to entry etc. Be warned, a company like Apple comes up on a lot of Value screens.
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Re: Value etf’s that actually contain value?

Post by UpperNwGuy »

Bad companies that are cheap for a reason bother me, too, and it's part of why I refuse to tilt to value. I stick to Total Stock.
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jason2459
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Re: Value etf’s that actually contain value?

Post by jason2459 »

You may want to look at

qval/ival with a multi stage screening process and will only hold 50 stocks each.

avuv/avdv with a profitability screen

Slyv/viov with a least a small amount of quality screening by using the SP600 index
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
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Re: Value etf’s that actually contain value?

Post by Scooter57 »

I have been screening for value stocks for many months. I found several in the past 10 months that have done well for me since purchase. But right now everything I would want to own has been bid up so high that what is left, as you say, is the value traps--companies with poor earnings records and "challenged" business models.

ETFs have to keep buying stocks even when there really is nothing worth buying. Beyond that, you have to factor in non-quantatative factors along with the numbers to make sound value-based buying decisions. I don't think you can do valid value investing using an ETF.

Cap weighting makes the bigger value ETFs even worse as the stocks that dominate are those that have the least value characteristics after being the targets of buyer enthusiasm. So your new money buys mostly overvalued stocks and large cap perennial losers that always look like value but aren't. AT&T for example.
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Dug8498
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Re: Value etf’s that actually contain value?

Post by Dug8498 »

jason2459 wrote: Fri Apr 16, 2021 7:18 am You may want to look at

qval/ival with a multi stage screening process and will only hold 50 stocks each.

avuv/avdv with a profitability screen

Slyv/viov with a least a small amount of quality screening by using the SP600 index
Thank you for the suggestions. These are interesting funds, will need to explore a bit more
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Dug8498
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Re: Value etf’s that actually contain value?

Post by Dug8498 »

Scooter57 wrote: Fri Apr 16, 2021 7:33 am I have been screening for value stocks for many months. I found several in the past 10 months that have done well for me since purchase. But right now everything I would want to own has been bid up so high that what is left, as you say, is the value traps--companies with poor earnings records and "challenged" business models.

ETFs have to keep buying stocks even when there really is nothing worth buying. Beyond that, you have to factor in non-quantatative factors along with the numbers to make sound value-based buying decisions. I don't think you can do valid value investing using an ETF.

Cap weighting makes the bigger value ETFs even worse as the stocks that dominate are those that have the least value characteristics after being the targets of buyer enthusiasm. So your new money buys mostly overvalued stocks and large cap perennial losers that always look like value but aren't. AT&T for example.
I’m coming to the same conclusion that I’d need to either look into an active fund or buy individual funds. Neither are super high on my list of things I want to do.
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Re: Value etf’s that actually contain value?

Post by YRT70 »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
AVUV and AVDV select stocks based on value, size and profitability while screening for momentum.
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Dug8498
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Re: Value etf’s that actually contain value?

Post by Dug8498 »

YRT70 wrote: Fri Apr 16, 2021 11:29 am
Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
AVUV and AVDV select stocks based on value, size and profitability while screening for momentum.
Ahh yes i see these are listed on Paul merriman’s list of recommendations for etf’s in his portfolio for 2021. They’re rather new so I was a bit hesitant.
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Re: Value etf’s that actually contain value?

Post by jason2459 »

Dug8498 wrote: Fri Apr 16, 2021 6:45 pm
YRT70 wrote: Fri Apr 16, 2021 11:29 am
Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
AVUV and AVDV select stocks based on value, size and profitability while screening for momentum.
Ahh yes i see these are listed on Paul merriman’s list of recommendations for etf’s in his portfolio for 2021. They’re rather new so I was a bit hesitant.
Newly listed yes, but the team behind it are formerly from DFA with a long history.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
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Re: Value etf’s that actually contain value?

Post by corp_sharecropper »

A "bad company" has it's "badness" priced in, becoming a little "less bad", whether through management, overall macro reasons, or luck, causes it's price to rise. If you're going to judge stocks as "bad" then I don't think value is a good factor to invest in for you. It's a little ridiculous to expect that there's a bunch of great and underpriced companies out there that can be screened for. I mean, who wouldn't do that if that were the case. Value is basically unloved for a reason, usually a bit more unloved than they should be but there's a reason most market participants like them less and don't appreciate their potential, because they're kinda ugly
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Re: Value etf’s that actually contain value?

Post by Uniswap »

ICOW?
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Re: Value etf’s that actually contain value?

Post by patrick013 »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am
Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?


My hypothetical portfolio includes QDIV - quality dividends and SPHQ - just plain quality.
Maybe not value but certainly quality instead. Value lends stability where quality
adds extra stability.

I don't know when a good entry point will be, probably when their PE's are less than the
market portfolio's, the markets are so high based on reported earnings these days.
Reminds me of the 1987 market crash approaching a Giffen paradox.
age in bonds, buy-and-hold, 10 year business cycle
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Dug8498
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Re: Value etf’s that actually contain value?

Post by Dug8498 »

corp_sharecropper wrote: Fri Apr 16, 2021 7:10 pm A "bad company" has it's "badness" priced in, becoming a little "less bad", whether through management, overall macro reasons, or luck, causes it's price to rise. If you're going to judge stocks as "bad" then I don't think value is a good factor to invest in for you. It's a little ridiculous to expect that there's a bunch of great and underpriced companies out there that can be screened for. I mean, who wouldn't do that if that were the case. Value is basically unloved for a reason, usually a bit more unloved than they should be but there's a reason most market participants like them less and don't appreciate their potential, because they're kinda ugly
I’m more concerned when I see companies on the brink of bankruptcy that will be in the top ten holdings of a value etf.

I don’t really think a stock being unloved means it’s a value stock though. It is the job of financial companies to create products that perform better than other products, and I was just hoping that people knew of some options that screened a bit differently. I’m not expecting to love all holdings in an etf, that would defeat the purpose.
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Dug8498
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Re: Value etf’s that actually contain value?

Post by Dug8498 »

patrick013 wrote: Fri Apr 16, 2021 7:37 pm
Dug8498 wrote: Fri Apr 16, 2021 6:57 am
Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?


My hypothetical portfolio includes QDIV - quality dividends and SPHQ - just plain quality.
Maybe not value but certainly quality instead. Value lends stability where quality
adds extra stability.

I don't know when a good entry point will be, probably when their PE's are less than the
market portfolio's, the markets are so high based on reported earnings these days.
Reminds me of the 1987 market crash approaching a Giffen paradox.
I’ve never heard of a Griffen paradox, I’ll have to look that one up. Thanks!
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Re: Value etf’s that actually contain value?

Post by mokaThought »

Echoing the Avantis recommendations.

Also consider RPV (Invesco S&P 500 Pure Value ETF), which weights on value characteristics rather than market cap with a value screen. Don't let the "500" part fool you; it's about 128 holdings taken from the 500.
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Re: Value etf’s that actually contain value?

Post by Ocean77 »

I use VTV. You can check out the top holdings, these are all great companies, no "bad" ones among them. It's a good complement to the tech heavy S&P500. And dirt cheap like all Vanguard index funds, 0.04%.
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Re: Value etf’s that actually contain value?

Post by 000 »

I have GDXJ.
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Re: Value etf’s that actually contain value?

Post by Tingting1013 »

RYPNX
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Re: Value etf’s that actually contain value?

Post by vineviz »

Dug8498 wrote: Fri Apr 16, 2021 9:51 pm
corp_sharecropper wrote: Fri Apr 16, 2021 7:10 pm A "bad company" has it's "badness" priced in, becoming a little "less bad", whether through management, overall macro reasons, or luck, causes it's price to rise. If you're going to judge stocks as "bad" then I don't think value is a good factor to invest in for you. It's a little ridiculous to expect that there's a bunch of great and underpriced companies out there that can be screened for. I mean, who wouldn't do that if that were the case. Value is basically unloved for a reason, usually a bit more unloved than they should be but there's a reason most market participants like them less and don't appreciate their potential, because they're kinda ugly
I’m more concerned when I see companies on the brink of bankruptcy that will be in the top ten holdings of a value etf.

I don’t really think a stock being unloved means it’s a value stock though. It is the job of financial companies to create products that perform better than other products, and I was just hoping that people knew of some options that screened a bit differently. I’m not expecting to love all holdings in an etf, that would defeat the purpose.
A key to success as a value investor is being comfortable owning stocks that appear to other investors to be "on the brink of bankruptcy".

And the sad reality is that most active value fund managers can't figure out whether companies are "cheap for a reason" or not: over the past 15 years, 90% of actively managed small cap value funds underperformed the S&P 600 Value index.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Value etf’s that actually contain value?

Post by Tingting1013 »

vineviz wrote: Fri Apr 16, 2021 10:47 pm
Dug8498 wrote: Fri Apr 16, 2021 9:51 pm
corp_sharecropper wrote: Fri Apr 16, 2021 7:10 pm A "bad company" has it's "badness" priced in, becoming a little "less bad", whether through management, overall macro reasons, or luck, causes it's price to rise. If you're going to judge stocks as "bad" then I don't think value is a good factor to invest in for you. It's a little ridiculous to expect that there's a bunch of great and underpriced companies out there that can be screened for. I mean, who wouldn't do that if that were the case. Value is basically unloved for a reason, usually a bit more unloved than they should be but there's a reason most market participants like them less and don't appreciate their potential, because they're kinda ugly
I’m more concerned when I see companies on the brink of bankruptcy that will be in the top ten holdings of a value etf.

I don’t really think a stock being unloved means it’s a value stock though. It is the job of financial companies to create products that perform better than other products, and I was just hoping that people knew of some options that screened a bit differently. I’m not expecting to love all holdings in an etf, that would defeat the purpose.
A key to success as a value investor is being comfortable owning stocks that appear to other investors to be "on the brink of bankruptcy".

And the sad reality is that most active value fund managers can't figure out whether companies are "cheap for a reason" or not: over the past 15 years, 90% of actively managed small cap value funds underperformed the S&P 600 Value index.
Vineviz what is your opinion of AVUV? It has beaten IJS since inception, in both good and bad SCV markets
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Re: Value etf’s that actually contain value?

Post by nedsaid »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
The top holdings of the Vanguard Value Index (Large Caps) are stocks that I would love to own individually. How are Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson, United Health, Proctor & Gamble, and Bank of America bad companies?

What I will say is that the correct Value strategy is a combination of Value and Quality/Profitability and not Deep Value. Fine Cuban Cigars purchased when they go on sale vs. picking up cigar butts for a last few puffs. Charley Munger has it right that you want to buy wide moat companies and quality companies rather than companies that are just cheap. He famously said that it is better to buy a great company at a good price rather than a good company at a great price. Warren Buffett was convinced by Munger's arguments and refined his investing approach.

The Vanguard Value Index is a good Value index. So are the S&P Value indexes as they do some screening for Quality. You might see more junky companies in certain Small Cap indexes but I would have to research this more. I got good results with Vanguard Small Cap Value Index ETF and the iShares S&P 600 Small Cap Value Index. I would also point you to the Avantis ETFs, which are run by former DFA employees.
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Re: Value etf’s that actually contain value?

Post by Northern Flicker »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
The S&P 600 Small-Cap Value index has a quality screen (profitability and liquidity). Funds tracking it include VIOV, IJS, and SLYV. Multifactor funds do as well, but the presence of momentum exposure typically means less value exposure.

But deeper value means a larger risk premium being discounted in, i.e. a greater chance that future projected revenue will not materialize. Cheap companies are always cheap for a reason. If there is no reason for them to be cheap, then in an efficient market they will be bid up until price is commensurate with risk.
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Re: Value etf’s that actually contain value?

Post by Forester »

nedsaid wrote: Fri Apr 16, 2021 11:18 pm What I will say is that the correct Value strategy is a combination of Value and Quality/Profitability and not Deep Value. Fine Cuban Cigars purchased when they go on sale vs. picking up cigar butts for a last few puffs. Charley Munger has it right that you want to buy wide moat companies and quality companies rather than companies that are just cheap. He famously said that it is better to buy a great company at a good price rather than a good company at a great price. Warren Buffett was convinced by Munger's arguments and refined his investing approach.

The evidence for an annually reconstituted value strategy is exactly opposite, if the value decile is further split into two; the cheapest 5% of stocks comprehensively beat the cheapest 5% to 10%. Munger is buying his moat companies, using what qualitative skills he has, and attempting to hold for a long time. Versus an ETF product for retail investors (or an academic value backtest) which must be rules-based, buy according to price ratios and rebalance constantly, to maintain the value orientation.

Your notion of "quality Buffet/Munger value" being superior only played out in the 1970s when the deep value stocks and quality value stocks, both had similar enterprise multiples. With reference to 'Deep Value' by Tobias Carlisle, 2014.
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Dug8498
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Re: Value etf’s that actually contain value?

Post by Dug8498 »

nedsaid wrote: Fri Apr 16, 2021 11:18 pm
Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
The top holdings of the Vanguard Value Index (Large Caps) are stocks that I would love to own individually. How are Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson, United Health, Proctor & Gamble, and Bank of America bad companies?

What I will say is that the correct Value strategy is a combination of Value and Quality/Profitability and not Deep Value. Fine Cuban Cigars purchased when they go on sale vs. picking up cigar butts for a last few puffs. Charley Munger has it right that you want to buy wide moat companies and quality companies rather than companies that are just cheap. He famously said that it is better to buy a great company at a good price rather than a good company at a great price. Warren Buffett was convinced by Munger's arguments and refined his investing approach.

The Vanguard Value Index is a good Value index. So are the S&P Value indexes as they do some screening for Quality. You might see more junky companies in certain Small Cap indexes but I would have to research this more. I got good results with Vanguard Small Cap Value Index ETF and the iShares S&P 600 Small Cap Value Index. I would also point you to the Avantis ETFs, which are run by former DFA employees.
Nothing wrong with any of those companies, but some of them definitely far too expensive right now.

I guess my example pertains more to small cap value funds.

Thank you also for the avantis recommendation!
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Re: Value etf’s that actually contain value?

Post by vineviz »

Tingting1013 wrote: Fri Apr 16, 2021 10:49 pm Vineviz what is your opinion of AVUV? It has beaten IJS since inception, in both good and bad SCV markets
My opinion on AVUV is that it is .... fine. The track record is too short to draw any firm conclusions about the relative strengths of the approach.
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Re: Value etf’s that actually contain value?

Post by YRT70 »

Dug8498 wrote: Fri Apr 16, 2021 6:45 pm
YRT70 wrote: Fri Apr 16, 2021 11:29 am
Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
AVUV and AVDV select stocks based on value, size and profitability while screening for momentum.
Ahh yes i see these are listed on Paul merriman’s list of recommendations for etf’s in his portfolio for 2021. They’re rather new so I was a bit hesitant.
Larry Swedroe and Ben Felix also recommend these ETFs in their portfolios. Here's an in depth look: https://www.pwlcapital.com/wp-content/u ... h-ETFs.pdf
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Re: Value etf’s that actually contain value?

Post by David Jay »

Dug8498 wrote: Sat Apr 17, 2021 5:39 amNothing wrong with any of those companies, but some of them definitely far too expensive right now.
Sounds like the good companies are too expensive and the cheap companies are on the verge of bankruptcy.

Maybe we can call that the “Value Paradox”.
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Re: Value etf’s that actually contain value?

Post by nedsaid »

Forester wrote: Sat Apr 17, 2021 5:10 am
nedsaid wrote: Fri Apr 16, 2021 11:18 pm What I will say is that the correct Value strategy is a combination of Value and Quality/Profitability and not Deep Value. Fine Cuban Cigars purchased when they go on sale vs. picking up cigar butts for a last few puffs. Charley Munger has it right that you want to buy wide moat companies and quality companies rather than companies that are just cheap. He famously said that it is better to buy a great company at a good price rather than a good company at a great price. Warren Buffett was convinced by Munger's arguments and refined his investing approach.

The evidence for an annually reconstituted value strategy is exactly opposite, if the value decile is further split into two; the cheapest 5% of stocks comprehensively beat the cheapest 5% to 10%. Munger is buying his moat companies, using what qualitative skills he has, and attempting to hold for a long time. Versus an ETF product for retail investors (or an academic value backtest) which must be rules-based, buy according to price ratios and rebalance constantly, to maintain the value orientation.

Your notion of "quality Buffet/Munger value" being superior only played out in the 1970s when the deep value stocks and quality value stocks, both had similar enterprise multiples. With reference to 'Deep Value' by Tobias Carlisle, 2014.
Why then are the practitioners of factor investing combining Value with Quality/Profitability? Why did DFA started setting Momentum to Neutral when screening for Value stocks?

In my own little individual stock portfolio, deeper Value stocks like Ford and Gilead have not done very much since I purchased them. Coke has done better though it didn't fit my criterion for Value, I held my nose and bought anyways. I bought Microsoft and Applied Materials when they were truly Value stocks, I had to be very patient with Microsoft as it did nothing for about seven years. Applied Materials started moving up not long after I bought it. Coke wasn't a Value stock when I bought it and it has done okay. Microsoft and Applied Materials were certainly examples of Quality companies trading at good prices but in Microsoft's case, it needed a catalyst to get the stock moving which was a change in CEO.
Last edited by nedsaid on Sat Apr 17, 2021 10:39 am, edited 1 time in total.
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Re: Value etf’s that actually contain value?

Post by Scooter57 »

nedsaid wrote: Fri Apr 16, 2021 11:18 pm
The top holdings of the Vanguard Value Index (Large Caps) are stocks that I would love to own individually. How are Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson, United Health, Proctor & Gamble, and Bank of America bad companies?
Berkshire Hathaway has always traded at a premium, but its current price is way higher than what its usual premium has been and quite high for what analysts are projecting for future earnings. It was a wonderful company to invest in years ago. But it has become way too large to do what it used to do so successfully and its investment history over the past 7 years I've been following it is mixed. IBM, Kraft-Heinz, airlines, Occidental Petroleum were terrible buys, and violated Buffett's stated principals not to invest in things he didn't understand (IBM, for example) or airlines. It's pretty clear that other people are picking stocks for BRK now and that they aren't as good as Munger and Buffett used to be. When they go, which is, in the nature of things, going to happen within a decade or so, BRK could plummet.

Johnson & Johnson is far from being a value stock. Based on its historical average P/E and analysts' forecasts of future growth (2 year horizon) it is overvalued now. Beside that, it has a long history of criminal behavior where its execs have been informed their products were toxic (asbestos baby powder) or were maiming and killing people (DePuy metal-on-metal hip replacements) and kept on selling them anyway. There is lots of liability still for those actions. I don't think companies should weasel their way out of responsibility for harming their customers and get away with slaps on the wrist, so it isn't something I'd want to own. WIth their track record, I have been wondering since they announced it what ugly secrets will be revealed about their vaccine's true performance during trials.

JP Morgan Chase could be considered to be at fair value, but is actually trading at a price higher than the usual multiple it trades at on average. Financials seem to always trade at lower multiples, so I doubt it is an any way a true value stock right now.

Bank of America is valued to perfection even if its earnings in two years match analysts expectations. But it has a long history of very ragged performance. Much worse than JPM. Again, maybe something investors might want, but far from being a Value stock by any combination of value metrics.

I own PG but I bought it at a far, far better price than it is at now. It is now very overvalued by the metrics I use.
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nedsaid
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Re: Value etf’s that actually contain value?

Post by nedsaid »

Dug8498 wrote: Sat Apr 17, 2021 5:39 am
nedsaid wrote: Fri Apr 16, 2021 11:18 pm
Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
The top holdings of the Vanguard Value Index (Large Caps) are stocks that I would love to own individually. How are Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson, United Health, Proctor & Gamble, and Bank of America bad companies?

What I will say is that the correct Value strategy is a combination of Value and Quality/Profitability and not Deep Value. Fine Cuban Cigars purchased when they go on sale vs. picking up cigar butts for a last few puffs. Charley Munger has it right that you want to buy wide moat companies and quality companies rather than companies that are just cheap. He famously said that it is better to buy a great company at a good price rather than a good company at a great price. Warren Buffett was convinced by Munger's arguments and refined his investing approach.

The Vanguard Value Index is a good Value index. So are the S&P Value indexes as they do some screening for Quality. You might see more junky companies in certain Small Cap indexes but I would have to research this more. I got good results with Vanguard Small Cap Value Index ETF and the iShares S&P 600 Small Cap Value Index. I would also point you to the Avantis ETFs, which are run by former DFA employees.
Nothing wrong with any of those companies, but some of them definitely far too expensive right now.

I guess my example pertains more to small cap value funds.

Thank you also for the avantis recommendation!
If you say these stocks are too expensive, can you give me an example?

You said that the Value ETFs were full of bad companies, I gave you the example of the Vanguard Value Index and maybe you can start there. I then pointed out that the top holdings in the Value Index were companies that I would be proud to own and then you said they were too expensive?

There are good Value products that I recommended above and they would be a good start for you.
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Re: Value etf’s that actually contain value?

Post by mrpotatoheadsays »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.
Just wondering if there are any funds or fund families that people like/ can recommend for value?
Best in class and alternatives: https://paulmerriman.com/best-in-class- ... hold-2021/
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Re: Value etf’s that actually contain value?

Post by nedsaid »

Scooter57 wrote: Sat Apr 17, 2021 9:49 am
nedsaid wrote: Fri Apr 16, 2021 11:18 pm
The top holdings of the Vanguard Value Index (Large Caps) are stocks that I would love to own individually. How are Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson, United Health, Proctor & Gamble, and Bank of America bad companies?
Berkshire Hathaway has always traded at a premium, but its current price is way higher than what its usual premium has been and quite high for what analysts are projecting for future earnings. It was a wonderful company to invest in years ago. But it has become way too large to do what it used to do so successfully and its investment history over the past 7 years I've been following it is mixed. IBM, Kraft-Heinz, airlines, Occidental Petroleum were terrible buys, and violated Buffett's stated principals not to invest in things he didn't understand (IBM, for example) or airlines. It's pretty clear that other people are picking stocks for BRK now and that they aren't as good as Munger and Buffett used to be. When they go, which is, in the nature of things, going to happen within a decade or so, BRK could plummet.

Nedsaid: My prediction is that eventually Berkshire-Hathaway will be broken up.

Johnson & Johnson is far from being a value stock. Based on its historical average P/E and analysts' forecasts of future growth (2 year horizon) it is overvalued now. Beside that, it has a long history of criminal behavior where its execs have been informed their products were toxic (asbestos baby powder) or were maiming and killing people (DePuy metal-on-metal hip replacements) and kept on selling them anyway. There is lots of liability still for those actions. I don't think companies should weasel their way out of responsibility for harming their customers and get away with slaps on the wrist, so it isn't something I'd want to own. WIth their track record, I have been wondering since they announced it what ugly secrets will be revealed about their vaccine's true performance during trials.

Nedsaid: Morningstar rates J&J at 3% above fair value. Price to forward earnings is 17, which in years past was pretty normal for the market as a whole. Looking at the other metrics, it is clear that J&J is not a classic Value stock right now. I do recall that J&J handled the Tylenol scare pretty well and received lots of praise regarding company actions. No comment on the hip replacements or baby powder other than to say these issues are not unique to J&J. I have not followed these particular stories closely. Product liability suits happen all of the time. Things go wrong and companies get sued.

JP Morgan Chase could be considered to be at fair value, but is actually trading at a price higher than the usual multiple it trades at on average. Financials seem to always trade at lower multiples, so I doubt it is an any way a true value stock right now.

Nedsaid: The forward P/E is about 12-13 which is typical for financial companies. Morningstar rates it price at about 10% above fair value.

Bank of America is valued to perfection even if its earnings in two years match analysts expectations. But it has a long history of very ragged performance. Much worse than JPM. Again, maybe something investors might want, but far from being a Value stock by any combination of value metrics.

I own PG but I bought it at a far, far better price than it is at now. It is now very overvalued by the metrics I use.

Nedsaid: The consumer staples stocks are never cheap, I looked at Proctor and Gamble before and never bought individually. I bought Coke in recent years, something I wanted to own for years but could never pull the trigger. Eventually I held my nose and bought anyways. The Low Volatility story has been out for years now and these stocks last I looked were more expensive than the market itself.
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Re: Value etf’s that actually contain value?

Post by nedsaid »

Another comment regarding financial metrics, keep in mind that the Covid-19 pandemic has greatly affected the economy and shorter term a lot of numbers got distorted, particularly earnings. What I would say is to keep watching the numbers and take a longer view, lots of firms took earnings hits and it will take time to see how much of this was temporary.
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Re: Value etf’s that actually contain value?

Post by thenextguy »

Any value fans notice that QVAL is finally starting to have a run?
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Re: Value etf’s that actually contain value?

Post by Scooter57 »

nedsaid wrote: Sat Apr 17, 2021 10:33 am Another comment regarding financial metrics, keep in mind that the Covid-19 pandemic has greatly affected the economy and shorter term a lot of numbers got distorted, particularly earnings. What I would say is to keep watching the numbers and take a longer view, lots of firms took earnings hits and it will take time to see how much of this was temporary.
The analysts' estimates I'm using, which come from Factset, go out two years and have already factored in a robust recovery. That is why these companies look a bit dangerous to me as most of them are only fair valued in 2 years if everything works out the way those enthusiastic stock-pushing analysts predict.

Re Johnson & Johnson. Many companies have product liability suits where people are harmed by products. What is different with the J&J suits is that there is substantial evidence that the executives were fully aware of the damage being done and kept selling the products, hiding the problem as long as they could. In the case of those hip replacements, many people were left in excruitiating pain, or with hips so damaged they couldn't get another replacement, while others, who tended to be elderly, ended up having to have replacement surgeries they should not have needed, during which they died. The execs knew this was happening but kept selling the highly profitable product.

The only similar case I can think of is LIlly's behavior selling Zyprexa off label where the company knew it was causing permanent diabetes in young people to whom it should never have bee prescribed (I knew one personally) the execs kept selling it off label because, again, of the high profits. They got the slap on the wrist. Even then, Zyprexa didn't kill people. The DePuy metal on metal hip replacements did. So a case could be made that this is a company whose ethics put it outside the pale.

I am not alone in thinking like this. The ESG index used by ETFs like ESGV excludes Johnson & Johnson.
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Re: Value etf’s that actually contain value?

Post by DB2 »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am If I’ve missed other threads on this, feel free to re-direct me to those threads!

I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.

Are there any etf’s that screen using superior methods for this? Or would this be leaning more towards active management?

Just wondering if there are any funds or fund families that people like/ can recommend for value?

Thanks!
Maybe it's just me, but a value ETF that tracks an index seems to narrow to me. Picking value stocks by its nature is active. What about Wellington or Global Wellington? You do get about 1/3 in bonds, but some make the case for that active part as well if inflation continues to pick up.
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Re: Value etf’s that actually contain value?

Post by nedsaid »

Scooter57 wrote: Sat Apr 17, 2021 11:50 am
nedsaid wrote: Sat Apr 17, 2021 10:33 am Another comment regarding financial metrics, keep in mind that the Covid-19 pandemic has greatly affected the economy and shorter term a lot of numbers got distorted, particularly earnings. What I would say is to keep watching the numbers and take a longer view, lots of firms took earnings hits and it will take time to see how much of this was temporary.
The analysts' estimates I'm using, which come from Factset, go out two years and have already factored in a robust recovery. That is why these companies look a bit dangerous to me as most of them are only fair valued in 2 years if everything works out the way those enthusiastic stock-pushing analysts predict.

Re Johnson & Johnson. Many companies have product liability suits where people are harmed by products. What is different with the J&J suits is that there is substantial evidence that the executives were fully aware of the damage being done and kept selling the products, hiding the problem as long as they could. In the case of those hip replacements, many people were left in excruitiating pain, or with hips so damaged they couldn't get another replacement, while others, who tended to be elderly, ended up having to have replacement surgeries they should not have needed, during which they died. The execs knew this was happening but kept selling the highly profitable product.

The only similar case I can think of is LIlly's behavior selling Zyprexa off label where the company knew it was causing permanent diabetes in young people to whom it should never have bee prescribed (I knew one personally) the execs kept selling it off label because, again, of the high profits. They got the slap on the wrist. Even then, Zyprexa didn't kill people. The DePuy metal on metal hip replacements did. So a case could be made that this is a company whose ethics put it outside the pale.

I am not alone in thinking like this. The ESG index used by ETFs like ESGV excludes Johnson & Johnson.
I pretty much retired from stock picking after the 2000-2002 bear market. Part of it was my perception that all the research I did made little impact on returns. Another part of it was that I realized that what I was doing was sampling the market. So I relied more on the broker for ideas and I kept what I had. So I have replaced stocks since then but I no longer do the exhaustive research that I used to. If the story is compelling and the valuations look reasonable, I will buy. I have a Morningstar subscription and I will look at their research and talk things over with the broker and ask him questions. I research to some degree but not like what I used to do.

I will say from experience that deep value just didn't seem to work nearly as well as buying quality companies temporarily out of favor or having temporary problems. I bought cheap stocks like Ford, St. Joe Paper, Gilead Sciences, and others and somehow they just didn't work out. The combination of Value and Quality seemed to work out better. But that is my experience but I suppose that people would say that it is anecdotal.

As far as Johnson & Johnson, I will say that the company once had a sterling reputation. Their handling of the Tylenol scare was cited as a textbook example of how a corporation should handle a crisis. I recall the company received a lot of praise for that. As far as the examples you cited, something must have changed. What I will say is that when product liability lawsuits come up, there is always a big difference of opinion as to what happened. Not here to defend corporate malfeasance.
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Re: Value etf’s that actually contain value?

Post by Scooter57 »

nedsaid wrote: Sat Apr 17, 2021 11:31 pm I will say from experience that deep value just didn't seem to work nearly as well as buying quality companies temporarily out of favor or having temporary problems. I bought cheap stocks like Ford, St. Joe Paper, Gilead Sciences, and others and somehow they just didn't work out. The combination of Value and Quality seemed to work out better. But that is my experience but I suppose that people would say that it is anecdotal.
So far, my value investing strategy has worked well for me, in terms of accomplishing what I set out to accomplish, which is NOT to "beat the market" when the market is Apple, Microsoft, Facebook, Amazon, and Tesla. I use mutual funds and ETFs for the bulk of my investing, but the devastation of fixed income yield has gotten me back into stock picking with the goal of finding staid, solid, established companies that have a history of paying decent dividends but also of growing earnings. I look at numbers, but I also apply a certain amount of qualitative thinking along the lines of "what does this company sell, do I like their products or service what factors can I see changing their business, etc. etc.

Bogleheads would say, "Do you think you see something no one else does? There are thousands of professionals scanning this stuff with tools beyond what you have." But a few years of investing the way I do has taught me that this is NOT as true as people think. The professionals are using computers to extract every bit of information from publicly reported financial sources, but when I listen to the questions asked by analysts on quarterly earnings calls, I am often surprised at how ignorant they sound about the actual business the company is in.

Years ago I started following a cult stock very closely for reasons that had nothing to do with investing. They claimed their product would revolutionize the industry that serves a population whose study I have devoted 20 years of my career to. (I'm being vague here because I'm pretty identifiable in my niche and like to keep who I am private.) It took about three months to realize that not only did the people running this company (at the time, quite high profile) not understand their potential customer base, but none of the analysts on their calls had a clue about the mechanics of how their product worked, how competing products were marketed in the real world, and, most importantly, why the way the product worked meant it would NEVER get traction in the market place, though it was actually a very good product that did something remarkable. Many years later, nothing has changed except that a lot of investors have lost a lot of money and a lot of shorts have made just as much.

When Warren Buffett says not to invest in things you don't understand he is saying something more profound than most people realize. So I invest in companies where I, or people I trust, have a good grasp on what the company does and its customers. This is not all that different from what Peter Lynch preached, except that before I apply those qualitative factors I take a long hard look at those quantitative ones, which is made a whole lot easier with software and some other resources that can show me financial trends in a few minutes that would have taken hours to dig up 20 years ago.

So, for example, I invested in Snap-On Inc, which makes mechanics tools when its PE was far lower than usual, even though its earnings were only mildly impaired by the pandemic. It's dividend at the time met my parameters. It's dividend paying history suggested it would keep paying that dividend. But what swayed me was that I had heard quite a bit about the company already, because a close friend who is obsessed with tools told me theirs were by far the best quality, and told me various anecdotes that suggested that the company had a very strong reputation among the kinds of people who would buy its franchises--working class guys who had worked in auto repair shops who wanted to "be their own boss." I checked out Better Business Bureau complaints and found that though there were quite a few, they fell into a very clear pattern that was what you would expect of a company selling franchises. I knew something about franchising since a family member had been in charge of training and managing franchisees for a small chain a few years ago. figured the company would do better than expected because of the pandemic, because there would be more potential customers worried about losing their jobs, and it has. My only regret with that purchase was that the price started to rise so swiftly after my initial investment that I couldn't support buying any more to fill out my position because it had gone way out of value. It's price is currently 60% above what I paid for it. If it ever gets back to value, I will buy more. but meanwhile I am happy with the yield on my investment.

In contrast, Kimberley Clark has the reputation of being a great dividend-paying stock and the pandemic boosted its sales. I watched it for a while, when last March's market drop brought it into value and the numbers looked good, and even bought a few shares. But then I bought some of their toilet paper when it was back on the shelves. The quality was terrible! Right after that, one of my kids explained why neither they nor any of their 30-something friends with modest incomes were buying disposable diapers for their kids anymore. It turns out there is a very effective selection of reusable diaper "systems" sold now that are very different from the cloth diapers my generation fled from. Younger people who care about the environment are all buying them. They also save them a LOT of money. Since Pampers' sales are a major part of Kimberley Clark's profits, I tax loss harvested my few shares, deployed the money elsewhere, and have no regrets. Nowhere in Kimberley's analyst sessions will you find any questions about the impact of reusable diaper systems and deterioration of the quality of Cottonelle (which was shockingly bad.) It's all just about the current and projected numbers.

I have invested in several food company stocks when they were in value and paying a dividend that met my criteria. I am very familiar with supermarkets and the specific lines of food they sell and their shelf placement because I have shopped for food for decades. I bought stock in Lowes which is where I usually end up buying hardware items I need, though HD is more convenient to where I live. I found it by screening financials, first, and I figured that with the lockdowns many people would be doing home projects obsessively. But when the numbers were very similar, the difference in the quality of the selection of products stocked in Lowes (high) and HD (not as nice) that I have personally experienced made the difference. As did Lowes friendly and very responsive customer service when I bought a defective air conditioner from them.

I am not arguing that I am some kind of investment genius, because I'm not. In the short term, I could have made more money investing more in the Vanguard Total Stock Market, but I have plenty in it already, not to mention a tech tilt with the Vanguard Technology ETF. I was investing using a value strategy because I was investing money that had been in CDs paying 3.55%, which I did not want to invest in the likes of Amazon, Facebook, Tesla & Co. so the strength of the company, its valuation when I bought it, and its dividend history mattered more to me than short term price appreciation.

So my point is that satisfying Value investing requires more than just number crunching. But since number crunching is what computers do best, what young stock analysts do best, and what drives most mainstream decisions about what is a value stock, numerical analysis is mostly what is driving financial industry definitions of what is a value stock. I agree the numbers are where you start, but after you have selected the few stocks that make it through the number screens, you do have to start using that wonderful, unique wet computer, the human brain.
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Re: Value etf’s that actually contain value?

Post by nedsaid »

Scooter57 wrote: Sun Apr 18, 2021 7:43 am
nedsaid wrote: Sat Apr 17, 2021 11:31 pm I will say from experience that deep value just didn't seem to work nearly as well as buying quality companies temporarily out of favor or having temporary problems. I bought cheap stocks like Ford, St. Joe Paper, Gilead Sciences, and others and somehow they just didn't work out. The combination of Value and Quality seemed to work out better. But that is my experience but I suppose that people would say that it is anecdotal.
So far, my value investing strategy has worked well for me, in terms of accomplishing what I set out to accomplish, which is NOT to "beat the market" when the market is Apple, Microsoft, Facebook, Amazon, and Tesla. I use mutual funds and ETFs for the bulk of my investing, but the devastation of fixed income yield has gotten me back into stock picking with the goal of finding staid, solid, established companies that have a history of paying decent dividends but also of growing earnings. I look at numbers, but I also apply a certain amount of qualitative thinking along the lines of "what does this company sell, do I like their products or service what factors can I see changing their business, etc. etc.

Bogleheads would say, "Do you think you see something no one else does? There are thousands of professionals scanning this stuff with tools beyond what you have." But a few years of investing the way I do has taught me that this is NOT as true as people think. The professionals are using computers to extract every bit of information from publicly reported financial sources, but when I listen to the questions asked by analysts on quarterly earnings calls, I am often surprised at how ignorant they sound about the actual business the company is in.

Years ago I started following a cult stock very closely for reasons that had nothing to do with investing. They claimed their product would revolutionize the industry that serves a population whose study I have devoted 20 years of my career to. (I'm being vague here because I'm pretty identifiable in my niche and like to keep who I am private.) It took about three months to realize that not only did the people running this company (at the time, quite high profile) not understand their potential customer base, but none of the analysts on their calls had a clue about the mechanics of how their product worked, how competing products were marketed in the real world, and, most importantly, why the way the product worked meant it would NEVER get traction in the market place, though it was actually a very good product that did something remarkable. Many years later, nothing has changed except that a lot of investors have lost a lot of money and a lot of shorts have made just as much.

When Warren Buffett says not to invest in things you don't understand he is saying something more profound than most people realize. So I invest in companies where I, or people I trust, have a good grasp on what the company does and its customers. This is not all that different from what Peter Lynch preached, except that before I apply those qualitative factors I take a long hard look at those quantitative ones, which is made a whole lot easier with software and some other resources that can show me financial trends in a few minutes that would have taken hours to dig up 20 years ago.

So, for example, I invested in Snap-On Inc, which makes mechanics tools when its PE was far lower than usual, even though its earnings were only mildly impaired by the pandemic. It's dividend at the time met my parameters. It's dividend paying history suggested it would keep paying that dividend. But what swayed me was that I had heard quite a bit about the company already, because a close friend who is obsessed with tools told me theirs were by far the best quality, and told me various anecdotes that suggested that the company had a very strong reputation among the kinds of people who would buy its franchises--working class guys who had worked in auto repair shops who wanted to "be their own boss." I checked out Better Business Bureau complaints and found that though there were quite a few, they fell into a very clear pattern that was what you would expect of a company selling franchises. I knew something about franchising since a family member had been in charge of training and managing franchisees for a small chain a few years ago. figured the company would do better than expected because of the pandemic, because there would be more potential customers worried about losing their jobs, and it has. My only regret with that purchase was that the price started to rise so swiftly after my initial investment that I couldn't support buying any more to fill out my position because it had gone way out of value. It's price is currently 60% above what I paid for it. If it ever gets back to value, I will buy more. but meanwhile I am happy with the yield on my investment.

In contrast, Kimberley Clark has the reputation of being a great dividend-paying stock and the pandemic boosted its sales. I watched it for a while, when last March's market drop brought it into value and the numbers looked good, and even bought a few shares. But then I bought some of their toilet paper when it was back on the shelves. The quality was terrible! Right after that, one of my kids explained why neither they nor any of their 30-something friends with modest incomes were buying disposable diapers for their kids anymore. It turns out there is a very effective selection of reusable diaper "systems" sold now that are very different from the cloth diapers my generation fled from. Younger people who care about the environment are all buying them. They also save them a LOT of money. Since Pampers' sales are a major part of Kimberley Clark's profits, I tax loss harvested my few shares, deployed the money elsewhere, and have no regrets. Nowhere in Kimberley's analyst sessions will you find any questions about the impact of reusable diaper systems and deterioration of the quality of Cottonelle (which was shockingly bad.) It's all just about the current and projected numbers.

I have invested in several food company stocks when they were in value and paying a dividend that met my criteria. I am very familiar with supermarkets and the specific lines of food they sell and their shelf placement because I have shopped for food for decades. I bought stock in Lowes which is where I usually end up buying hardware items I need, though HD is more convenient to where I live. I found it by screening financials, first, and I figured that with the lockdowns many people would be doing home projects obsessively. But when the numbers were very similar, the difference in the quality of the selection of products stocked in Lowes (high) and HD (not as nice) that I have personally experienced made the difference. As did Lowes friendly and very responsive customer service when I bought a defective air conditioner from them.

I am not arguing that I am some kind of investment genius, because I'm not. In the short term, I could have made more money investing more in the Vanguard Total Stock Market, but I have plenty in it already, not to mention a tech tilt with the Vanguard Technology ETF. I was investing using a value strategy because I was investing money that had been in CDs paying 3.55%, which I did not want to invest in the likes of Amazon, Facebook, Tesla & Co. so the strength of the company, its valuation when I bought it, and its dividend history mattered more to me than short term price appreciation.

So my point is that satisfying Value investing requires more than just number crunching. But since number crunching is what computers do best, what young stock analysts do best, and what drives most mainstream decisions about what is a value stock, numerical analysis is mostly what is driving financial industry definitions of what is a value stock. I agree the numbers are where you start, but after you have selected the few stocks that make it through the number screens, you do have to start using that wonderful, unique wet computer, the human brain.
Hey Scooter, thanks so much for sharing your investing stories. You and I have a lot in common and I could see after a while that you knew your stuff. I thought, oh oh, this guy is going to make me look like I don't know what I am talking about. In reality, I have learned a lot over the years and have learned about portfolio construction and stock selection. This has given me an appreciation for what portfolio managers do. There is a lot to this. I am a big believer in the power of narrative, every investment has a story as does every investor. Successful investing involves matching investments with the investor.

Peter Lynch talked a lot about having a story behind every investment and in buying where the narrative made sense and when it was compelling. Of course, Lynch and his analysts did their due diligence, they did their number crunching but they also interviewed management and visited companies. I talked about this too here on the forum and the quants here probably thought I was an idiot. Actually a few people here have all but said that.

I felt a lot better about all of this when I saw a lecture given by Professor Damodaran on YouTube. Larry Swedroe is a big fan and religiously reads his blog. The Professor made the statement that behind every good valuation is a good story. He related that Uber reframed the perception of themselves from being a taxi or ridesharing service to being a logistics company. In other words, they delivered not only people but they delivered packages. He said the difference in the story made billions of dollars of difference in their value. I was very impressed. Damodaran also talked about the lifecycle of a company and the type of leadership that was needed at each stage. He talked about the importance of leadership which was something that Lynch also discussed a lot.

Yes, I am looking to get a growing revenue stream from my stocks just as you are. What happens is that a few stocks dominate your portfolio over time and this is another challenge for those of us with individual stock portfolios. The challenge is what I call the "Nedsaid effect" but that is another discussion.

I wish you the very best in your endeavors. As Paul Kangas would say, "I wish you the best of good buys."
A fool and his money are good for business.
Scooter57
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Re: Value etf’s that actually contain value?

Post by Scooter57 »

nedsaid wrote: Sun Apr 18, 2021 10:32 am
Yes, I am looking to get a growing revenue stream from my stocks just as you are. What happens is that a few stocks dominate your portfolio over time and this is another challenge for those of us with individual stock portfolios. The challenge is what I call the "Nedsaid effect" but that is another discussion.
I doubt any of my income-oriented individual stock investments will dominate my portfolio as none is more than 2% of my stock portfolio right now. And I only own one individual growth stock--BABA, which I couldn't resist, but if it wants to become a 10 bagger, fine. I can live with that. :D All the rest of the individual stocks are very boring companies with earnings growth histories that trend upward consistently through the years but growth rates slow enough that no one seems to speculate in them.

I have also recently bought some triple net REITs that have had good reputations for years, as they have been beaten down by the pandemic, even with rents coming in, and have recovered just enough to look attractive. But I am staying away from shopping centers and high yielders, not to mention the severely overvalued REITs that don't really own real estate, like the cell tower companies and data centers, which are way too overvalued. Since the latter type of REITs dominate VNQ I can't buy that kind of stock in index form. I do let a growth fund and the Vanguard Technology ETF (VGT) buy my tech stocks and aggressive growth stocks as I don't know enough to buy that kind of company on my own.

I have also avoided investing with a "dividend growth" strategy as it has become way too faddy. That has driven all the good companies that fit that classification up to prices that don't make sense. But that still left me some companies that have occasionally frozen their dividends for good reasons but have keep growing their earnings very steadily. These are boring companies which the dividend growth faddists are mostly ignoring. I don't confuse any of these stocks with bonds, but if they keep paying dividends through a sharp market downturn, I'm okay, as that kind of stock always rebounds. Because I didn't buy them at overvalued prices they just have to get back to something approaching fair value to work out and with a five year time frame that seems realistic. The run up over the last six months has given me a decent margin for giving back share price and still making the income I want.

I am very aware of what happens to the aging brain, and mine is no longer the sleek machine it once was. So my partner (who is much younger) has view access to my Vanguard accounts and keeps an eye on what I'm doing. At the first hint that perhaps I'm getting stupid or too impulsive, I'll step back. With that in mind, everything I'm buying is the kind of company that if I leave it alone for a decade or two should not harm what I want to leave my heirs.
secondopinion
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Re: Value etf’s that actually contain value?

Post by secondopinion »

Dug8498 wrote: Fri Apr 16, 2021 6:57 am I’ve been looking at various value etf’s for lcv, scv, and international value. The problem that I’m seeing is that many of the holdings aren’t value stocks, they’re just bad companies that are cheap for a reason.
If you take a 9-square with one axis of "expected growth" and the other axis of "company quality", the "high-quality, high expected growth" are the most pricey and the "low-quality, low expected growth" are the cheapest. Value is going to be on the "low expected growth" side, regardless of "quality"; most value ETFs I see do exactly this. Do not expect value funds to have "undiscovered" gold nuggets (that is not value; that is wishful thinking).
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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