Quality Value Investing
Achieving alpha by investing in a company's current wealth and a stock price's present value
Summary:
By modeling the guiding principles of the legendary superinvestors Warren Buffett, Benjamin Graham, Peter Lynch, and Howard Marks, I reinvented my investor self over 15 years ago.
In addition to research reports supporting market-beating real-time stock picks, the primary features of Quality Value Investing (QVI) are newsletter posts and book chapters on various topics of the quality-driven value investing paradigm.
QVI’s mission is to inspire individual investors to discover the skills necessary to build portfolio wealth that funds their life’s essential milestones.
Quality Value Investing’s premium subscribers can choose from high-value, low-cost monthly or annual plans.
Hello, I’m David J. Waldron, author of the international-selling book Build Wealth with Common Stocks and founder and contributing editor of Quality Value Investing (QVI).
To uncover fundamental investment value, QVI uses a proprietary analysis to inspire subscribers to build and maintain portfolios of the shares of quality companies purchased at value prices to fund life’s essential milestones, such as buying a home, paying college tuition, sponsoring a wedding, pursuing a passion, starting a business, or enjoying a comfortable retirement.
Since I believe investing newsletters should cost no more than a streaming channel, Quality Value Investing’s premium subscribers can choose from high-value, low-cost plans of $8 a month or $80 per year.
In addition, subscribers who choose the separate premium plus Founding Member Plan are eligible to receive a complimentary, personalized print copy of Build Wealth With Common Stocks. For their upfront generosity, Founding Premium+ subscribers also earn a complimentary permanent subscription after their first year (no need to pay again.)
Why Quality Value Investing?
For some background, around 2009, I transitioned to bottom-up value investing after struggling as a top-down growth investor for several years. By modeling the guiding principles of legendary investors Warren Buffett, Benjamin Graham, Peter Lynch, and Howard Marks, I began to pick stocks driven by their influential collective wisdom, which became the foundation of Quality Value Investing.
Buffett on profiting from the magic of compounding:
The ideal business is one that earns very high returns on capital, and that keeps using lots of capital at those high returns. That becomes a compounding machine.
—Warren E. Buffett in his answer to an audience question at the 2003 Berkshire Hathaway, Inc. ($BRK.A) ($BRK.B) annual shareholder meeting.
Graham on owning stocks protected by a wide margin of safety:
Confronted with a challenge to distill the secret of sound investment into three words, we venture the following motto, 'Margin of Safety.'
—Benjamin Graham, The Intelligent Investor (New York: Harper Collins, 1949)
Lynch on keeping investing super simple:
Never invest in any idea you can't illustrate with a crayon.
—Peter Lynch (with John Rothchild), Beating the Street (New York: Simon & Schuster, 1993, 1994)
Marks on investing in present value instead of speculative growth:
The choice isn't really between value and growth but between value today and value tomorrow. Growth investing represents a bet on company performance that may or may not materialize in the future, while value investing is based primarily on the analysis of a company's current wealth.
—Howard Marks, The Most Important Thing (New York, Columbia University Press, 2011)
As a result of my investor reinvention over 15 years ago, our concentrated family portfolio of the common shares of quality enterprises has outperformed the S&P 500 based on an equal-weighted average total return per holding during the same periods. I was fortunate to discover first-hand how quality-driven value investing prevails through all market cycles.
Acquiring Buffett’s magical compounding, Graham’s three-word secret, Lynch’s crayon metaphor, and Marks’ growth vs. value juxtaposition debunked my previous reliance on deep-dive analysis paralysis, business modeling overkill, and foolish attempts at predicting specific future outcomes when selecting individual stocks.
As a result of my renewed approach, I transitioned from an underperforming, near-sighted stock trader to an alpha-achieving, far-sighted company investor.
I shared the experience as a case study in my fourth book, Build Wealth With Common Stocks: Market-Beating Strategies for the Individual Investor. I am excited to bring the value investing ideals of rational thought, discipline, and patience to Quality Value Investing on Substack to educate subscribers on building life-changing portfolios.
Quality Value Investing’s Checklist Approach
My checklist-based approach to stock-picking generates an actionable investment thesis summarizing why I rate the company and its stock as a buy, hold, or sell. My easy-to-read and understandable research reports examine the value proposition, business fundamentals, shareholder yields, valuation multiples, and downside risks.
The value proposition defines the competitive advantage that a company’s products or services offer its customers compared to the industry, sector, or marketplace. The extent of the enterprise’s economic moat is also explored.
I then measure the company’s fundamentals, uncovering the performance strength of its senior management by examining revenue growth, net profit margin, return on equity, and return on invested capital.
As part of my due diligence, I average the total shareholder yields on earnings, free cash flow, and dividends to quantify how a targeted stock compares to the prevailing yield on the Ten-Year Treasury benchmark note. In other words, what is the equity bond rate of the common shares?
I weigh four select valuation multiples to estimate the intrinsic value of a targeted quality enterprise’s stock price. The model reflects market sentiment proximate to the financial vertical of sales, earnings per share, cash flow, and enterprise value to operating earnings.
When assessing the downside risks of a company and its common shares, I focus on metrics that, in my experience as an individual investor and market observer, often predict the potential risk/reward of the investment. The research emphasizes short- and long-term debt coverage, stock price volatility, short-seller interest, and historical performance against the market benchmark.
I assign each comprehensive checklist metric a bullish, neutral, or bearish-weighted rating. In contrast, the downside risk ratings are high, above average, average, below average, or low. My recommended picks are partial to below-average risk and low-risk profiles.
Discover how our family portfolio has outperformed the S&P 500 by overachieving on down-market days more often than in upmarket sessions, a crucial, mostly overlooked element of profitable common stock investing.
Despite my skepticism of predictive analysis, my reports conclude with potential catalysts that confirm or contradict (bulls say, bears say) my investment thesis. Hence, subscribers get balanced final thoughts of an otherwise asymmetric analysis.
Nonetheless, the buy, hold, or sell investment thesis is based on a qualitative and quantitative evaluation of the company’s current wealth and the stock price’s present value. Quality businesses with shares trading at reasonable prices earn buy ratings; expensive stocks of otherwise enduring enterprises receive hold ratings, while poor quality companies rate as sell or avoid regardless of valuation.
For a limited time, all new subscribers (free and paying) can download a free copy of the ebook or the PDF of the print edition of Build Wealth with Common Stocks.
Subscribers: Refer to your QVI welcoming email or direct message me for the link.
Quality Value Investing Subscriber Profile
Although Quality Value Investing welcomes every investor to participate and benefit, the platform best serves the following pre-retirement retail investors:
Everyday investors who are keen on the value investing model of buying the common shares of excellent businesses when trading at reasonable prices. Investors who are opening new or maintaining existing personal brokerage or tax-deferred accounts and want inspiration in structuring and managing their portfolios. In addition, they seek an affordable, value-added subscription-based service in their quest for lesser risk and lower cost stock market investing.
The primary feature of Quality Value Investing is full-text, premium subscriber-exclusive primary ticker research reports released weekly on the new and existing QVI Real-Time Stock Picks, each including the proprietary current wealth and present value checklists. In addition, free subscribers receive previews of most posts and occasional full-text offerings to encourage upgrades to the high-value, low-cost monthly or annual premium plans.
Individual investors often build portfolios to finance their life’s essential milestones. Thus, I assist subscribers in discovering how to keep investing super simple by focusing on the more tangible company current wealth and stock price present value instead of speculative future price or growth targets. Then, practice the behavioral arts of rational thought, discipline, and patience to take advantage of the magic of compounding, protected by a wide margin of safety to fund those milestones.
Premium Subscriber Exclusive Actionable Content
In addition to the research reports and educational newsletter posts, Quality Value Investing’s featured content includes premium subscriber-exclusive real-time portfolios supported by user guides, a glossary, and an interactive chat room.
The Real-Time Concentrated Portfolio replicates our market-beating family portfolio.
The Expanded Real-Time Stock Picks include companies researched, recommended, and published by QVI but not currently part of our concentrated family portfolio.
A User Guide for the QVI Real-Time Stock Picks, plus a Glossary of investing terms and metric targets for end-user reference.
The opportunities to read and post comments and participate in the interactive QVI Chat Room to pursue and maintain collaboration with like-minded quality-driven value investors.
Quality Value Investing greets new paying subscribers with actionable content, including getting-started posts like New Member Onboarding. In addition, QVI’s Substack Webpage encompasses direct access to QVI’s Stock Picks Real-Time Performance Trackers, the investing glossary, and the newsletter’s archives since launch.
I aim to release two narrative or research reports per week. QVI content archives are available 24-7 to premium subscribers who can send me a direct message any time of the day, night, or weekend with questions, suggestions, and comments. To be sure, Quality Value Investing is a hands-on service. Although I cannot provide personal financial advice per securities laws and regulations, I cherish interacting with members one-on-one and as a group.
Invest With Thought, Discipline, and Patience
Do-it-yourself everyday stock investors can beat the market or their investment goals over time by sticking to a simple menu of time-tested, winning investment principles, strategies, and practices. Paraphrasing baseball legend Yogi Berra, investing is ’90 percent half’ common sense. The ‘other half’ is discipline and patience.
The more profitable approach to retail investing is putting quality before speculation. Rationally thinking investors reject near-sighted trading schemes supporting controversial, unproven investment vehicles with limited utility for hopeful, although improbable, quick financial gains.
Disciplined investors learn to stop placing bets on faceless stocks and instead invest in quality businesses. This original concept of trading equities facilitated willing participants to take affordable partial stakes in publicly traded companies. I believe that approach remains the ideal model for retail investors.
Patience is the scarcest and, thereby, most valuable commodity available to everyday stock investors. Thus, informed investors have a far greater chance of getting rich slow than getting rich fast, and getting rich slowly is better than not.
As we navigate unpredictable market cycles, remember that rational, disciplined, and patient investors seldom lose money outside of rare market meltdowns. Although good and evil in the world are everlasting, as investors, we should remind ourselves that common sense, a commitment to quality at value, and taking the long view provides us the best edge to prevail through all market cycles.
About QVI’s Founder and Contributing Editor
David J. Waldron launched Quality Value Investing on Substack Finance, where he achieves stock market alpha by investing in a company’s current wealth and a stock price’s present value instead of unreliable predictive analysis and speculative growth.
David is the author of international-selling self-help books and subscription content that inspire the achievement of his readers’ financial goals and dreams. He previously enjoyed a twenty-five-year career as a postsecondary education executive. David received 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.
New readers and free subscribers can upgrade to a high-value, low-cost $8 monthly or $80 annual plan and partner with QVI to support their investing objectives. So why not start your alpha-achieving journey right now?
Disclosure: Our family portfolio has a long and beneficial position in the common shares of BRK.B. I wrote this post myself to express my opinions. I am not receiving compensation for it other than from Substack paid subscriptions and book royalties. I have no business relationship with any company or stock mentioned in this article.
Additional disclosure: David’s family portfolio, represented as the QVI Concentrated Portfolio, of predominantly dividend-paying common stocks has outperformed the S&P 500 Index since 2009, based on an equal-weighted, average total return for each holding during the same periods.
Disclaimer: David J. Waldron’s Quality Value Investing newsletter posts, book chapters, and real-time stock picks are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
