Quality Value Investing Defined
Objective, mission, and investing behaviors that have led to the achievement of stock market alpha
Defining quality value investing is arduous and forever debated in financial media.
Common-sense do-it-yourself investors favor simplicity over sophistication. Quality value investing is the most effective form of common stock investing, so I give our family portfolio and the concepts supporting each investment a symbolic kiss.
KISS — Keep Investing Super Simple.
The definition of value investing is steadfast to the word value as it applies to every aspect of our consuming lives, including investments. Here is how Merriam-Webster.com1 defines value:
Amount of money that something is worth. Price or cost of something. Something that can be bought for a lower or fair price. Usefulness or importance of something.
A valuation analysis of common stocks is similar to purchase considerations in other aspects of our lives.
What is the product or service worth to us? What is the quoted price? What is the difference between the two, and will the product or service be available for a lower or fairer price point in the future? Put another way, is it cheap based on the inherent value we place on the product or service? Just as important, why buy a bargain-priced product or service unless we find usefulness or importance in owning the product or service?
Now, substitute a company or stock for a product or service and reread the same paragraph based on the formal definition of value.
What is a slice of the company worth to us? What is the quoted stock price? What is the difference between the two, and will it be available for a lower or fairer price point? Put another way, is it cheap based on the inherent worth we place on the enterprise? Just as important, why buy a bargain-priced stock unless we see usefulness or importance in owning a slice of a quality business?
Quality value investing is the most straightforward investment strategy in a complex financial services industry.
The Objective of Quality Value Investing (QVI)
Let’s apply the above formal definition of value to an investment philosophy.
Buy and hold the common shares of US exchange-traded, predominantly dividend-paying, well-managed, financially sound businesses that produce easy-to-understand products or services, have enduring competitive advantages from economic moats, enjoy steady, free cash flow, and are trading at a discount to the investor’s perceived intrinsic value at the time of purchase. Then, of utmost importance and perhaps the biggest challenge, practice patience in waiting for the investment thesis to play out as projected over a long-term horizon.
QVI’s suggested objective or investment philosophy for retail investors is short, to the point, and focused on quality products and services. Financially sound companies representing the underlying common shares create built-in barriers to competition. So, first, we purchase targeted, high-quality securities at fair, reasonable, or bargain prices. Then, we hold for as long as the company’s and its stock’s performance confirms our conviction.
How do informed investors measure the quality of the products or services of a business, its enduring competitive advantages, financial strengths, perceived intrinsic value relative to the stock price, and downside risks?
Keep investing super simple by limiting our measurement and analysis to a handful of essential metrics in each critical area of the enterprise, such as the value proposition, management effectiveness, returns to shareholders, the stock price’s margin of safety, and the combined risk profiles of the company and its common shares.
Indeed, due diligence in the holdings and new ideas of the QVI Real-Time Stock Picks involves profiling the fundamentals of a selected company with a counter understanding and acceptance of the downside risks in case the investment thesis or measure of intrinsic value misfires.
Using proprietary screens encompassing the above metrics, I actively research individual common stock ideas for potential inclusion in the QVI Real Time Stock Picks and share the performance and trends with premium subscribers via the exclusive market-daily performance trackers and primary ticker research reports. The analysis in each piece follows the general outline shared in this newsletter for a concise, easy-to-read, and understandable information flow tying together each portfolio holding.
Markets go up and down at a moment’s notice, so we have to start somewhere. Thus, paying members of Quality Value Investing are informed about the targeted common shares of publicly traded companies added, held, or removed—but still tracked for transparency—from the QVI Stock Picks, for better or worse. Template-driven research annoys some readers, but the value of working from a flexible outline or checklist is the consistency and discipline it brings to our collective investing acumen.
Modest doses of rational thought, discipline, patience, and a pinch of common sense have produced a market-beating basket of common stocks in the QVI Stock Picks for 17 years as of this post.
The Mission of Quality Value Investing
The newsletter’s philosophical goal is for subscribers to experience an empathetic journey long and positive on self-paced financial education, mutual respect, and a shared passion for buy-and-hold investment excellence. And short and cynical of know-it-all gurus, disregard for the constructive counter opinions of others, and get-rich-quick trading schemes.
My purpose behind writing and publishing Quality Value Investing is to provide an actionable portfolio strategy prescribing a proven set of core methodologies for the benefit of wealth-building investors, as defined by its mission.
The Mission of Quality Value Investing:
Facilitate a community of rational, disciplined, and patient everyday investors passionate about learning, practicing, and sharing the art and science of building wealth from the magic of compounding, protected by a wide margin of safety.
Owning the common shares of world-class enterprises builds winning portfolios over time from the compounding total return of capital gains and dividends. Quality Value Investing—as illustrated in the QVI Stock Picks—is committed to the strict bottom-up, buy-and-hold investing paradigm. It avoids price targets, price alerts, technical charts, deep-dive analysis paralysis, business modeling overkill, top-down macro influences, momentum or trend investing, market timing, short selling, options trading, high-yield forward dividends, and trade set-ups.
The QVI newsletter is limited to advocating the long-term, low-fee ownership of quality companies’ predominantly dividend-paying common shares. Nevertheless, I enjoy sharing successes—and failures—with fellow retail investors as we are in this together for better and perhaps worse, although never on speculation.
Loved ones who benefit from our investment pursuits deserve more than the speculative flavors of the month emanating from the Wall Street fee machine. And we deserve better.
Mine Relevant Data and Exercise Self-Control
Successful retail-level investors mine relevant data, exercise self-control, and apply tenacity to portfolio construction and maintenance.
They avoid complicated or expensive investment vehicles and trading schemes in the hopes of making fast money. Profit-generating, independent investors are happy to leave those speculative ventures to professional traders and market gamblers.
To its credit, the financial services industry has rolled out versions of KISS—keep investing super simple—such as discounted or commission-free online brokerages and low-cost index funds. Nonetheless, investors suppress any advantages from discounted or free commissions by trading on margin or too often, thereby risking unnecessary debt, trading fees, and tax burdens on what was supposed to be a low-cost experience.
Active and Passive Investing in One Approach
Employing an invest-it-and-forget-it style is an ideal variant for passive index investors.
Quality Value Investing is for individual investors who want to merge the lower costs and lesser risks of passive investing—via hedging—with the potential for above-average returns or alpha from active buy-and-hold investing. Diligent investors enjoy picking and managing investments through rigorous education and discipline.
Although hedging is a complex paradigm of investing, in the context of the QVI newsletter, it represents a simple, broader-basket long position in a portfolio, such as an S&P 500 benchmark or similar index exchange-traded funds (ETF), to reduce the risk exposure of individual common stocks from the inevitable market gyrations. Future posts and course modules will examine this practical concept of portfolio hedging.
Using an active approach to investing, hedged by passive indexes, the QVI Stock Picks have proven that getting rich slowly by outperforming the market over the long term is possible on Main Street and is an enjoyable and self-actualizing experience.
Thank you for reading Quality Value Investing on Substack. I hope you enjoy and value the newsletter. I am excited to share the rewarding experience of applying current wealth and present value principles, strategies, and practices in our pursuit of total return investment alpha over long-term holding periods.
Make sure to perform your due diligence and review the necessary disclosures at the end of the post.
In conjunction with the principles, strategies, and practices presented in the Quality Value Investing newsletter, free subscribers are encouraged to access the QVI Real-Time Stock Picks, supported by simplified research and analysis, by upgrading to a premium subscription that offers high value at a low cost. Fully engage in the QVI community today.
About the Writer
David J. Waldron is the contributing editor of Quality Value Investing and the author of the international-selling book Build Wealth with Common Stocks: Market-Beating Strategies for the Individual Investor. David’s mission is to inspire his readers to achieve their financial goals and dreams. His work has been featured in Substack Finance, Seeking Alpha, MSN Money, TalkMarkets, ValueWalk, Yahoo Finance, QAV—Australia’s #1 Value Investing Podcast, Money Life with Chuck Jaffe, LifeBlood with George Grombacher, The Acquirer’s Multiple, Capital Employed, and on platforms like Amazon, Barnes & Noble, Apple Books, The BookLife Prize, and Publisher’s Weekly. David previously enjoyed a 25-year career as a postsecondary education executive. He earned a Bachelor of Science in Business Studies as a Garden State Scholar at Stockton University and completed The Practice of Management Program at Brown University.
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Disclosure: As of this writing, our total return family portfolio has long and beneficial positions in the common shares of all stocks in the QVI Concentrated Portfolio. I wrote this post myself, expressing my opinions. I am not receiving compensation for it (other than through Substack paid subscriptions.
Additional disclosure: Quality Value Investing (QVI) is an investment research newsletter for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, meaning they are not tailored to individual needs nor intended for portfolio construction beyond the QVI Real-Time Stock Picks, which are presented solely for educational purposes. David J. Waldron is an individual investor and author, not an investment advisor. Subscribers should always engage in their independent research or due diligence and consider consulting a fee-only certified financial planner, a licensed discount broker/dealer, a flat-fee registered investment advisor, a certified public accountant, or a specialized attorney before making any investment, income tax, or estate planning decisions.
Disclaimer: Although Quality Value Investing takes a skeptical view of the financial services industry, commonly known in the media as Wall Street—a euphemism for professional or institutional investing globally—it does not imply nor express specific issues or negative references regarding any actual organizations or individuals working within the financial services sector. Any perceived connection or offense to actual firms or individuals is coincidental and unintentional. In its general critique of the universal Wall Street business model, QVI avoids unproven conspiracy theories and offers a platform for commentary, critique, education, and parody. In this context, facts stand apart from any alternative perspectives. Therefore, the subjective thoughts shared by the author throughout the post are his opinions and should not be construed as factual.
Merriam-Webster, s.v. “value,” accessed July 1, 2020, https://www.merriam-webster.com/dictionary/value.