The famed Canadian investor,Peter Cundill, articulated his value investment approach when he coined the expression "Buying a dollar for 40 cents". I particularly like this phrase because it really encapsulates the notion that you are putting in a big margin of safety into every security purchase.
Even if your investment turns out to be worth 60 cents rather than the dollar you had hoped for, you are still making a profit and achieving a satisfying result.
What is a 40 cent dollar?
For this blog I am limiting my analysis to publicly listed investments which meet strict quantitative & qualitative criteria. These criteria are not always rigid because financial statements that companies produce are dynamic.
However, there are general themes that would encompass the type of investments we are looking for :-
1. we are avoiding investments in options, futures and any other derviatives. I would only recommend using options (eg puts) to hedge an existing position but not to speculate on.
2. we will consider investing in public companies internationally that meet the following criteria :
• trade for large discount to book value
• trade at 5 x free cash flow or less,
• offer 5% or higher dividend yield
• have little or no debt OR a conservative funding profile in terms of short & long term debt.
• have competent management who are shareholder friendly and have a good track record
• have understandable and sustainable business with a minimum operating history of 10 years or more.
• operate in a Country that has a history of protecting the rights of shareholders and private property rights generally.
Going forward
Thank you for visiting my blog. I look forward to sharing my views and ideas with you and hopefully unearth some hidden investment gems that qualify as true 40 cent dollars!
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