A story on value investing.

Over the past three years the words investing and trading have seemingly become interchangeable.

People of all ages from 16 to 80 call themselves "daytraders" and boast massive returns on options plays to the tune of thousands of percent...

But how real is this?

It seems as if everyone has become involved in financial markets since the pandemic in 2020, and data backs this up...

This is an exhausting cycle of gains and losses.

Options are inherently the most volatile asset class out there and as a result entice traders into thinking they can be the ones to always make consistent, monstrous gains.

Like moths drawn to a flame.

Options were created as a tool for investors to hedge positions, never as securities to build entire portfolios off of...

But that's besides the point.

Options aren't the only perpetrators when it comes to retail trading demise.

It often comes down to the fact that most traders simply do not understand how to properly analyze company financials and create proper valuation models and price targets.

Instead many rely on news and social media hype to base their opinions regarding stocks, and oftentimes give up and sell for losses when things do not immediately go in their favor.

Those losses add up.

Trust me, I've been there.

A great example I like to give regarding this issue is my time spent as a rookie investor during the dotcom bubble.

For a period at the end of the 90s it felt as if anything you touched turned to gold, all you had to do was be exposed to stocks.

And this was true.

Valuations were ballooning and the hype was palpable... just like today?

Amidst all this chaos I found myself trying my hand at "stock picking."

Legendary traders all picked their own stocks, not just passively investing into broad funds, and while this does make sense, you actually need to know what you're doing for this to work...

I didn't.

While every company in the world that owned a ".com" domain was going public and making millionaires overnight, I tried to outsmart the trend, buying a stock that actually seemed useful in the new internet era...

Microstrategy.

The company produced software for data mining and business intelligence using "nonlinear mathematics."

Sounded smart enough for me...

So right at the turn of the millenia in January 2000, I backed up the truck at $110/share and let it ride.

By March the stock had reached over $330/share... Andy's a genius.

That is until Monday, March 20th, 2000.

The company announced that their revenue figures were overstated as a result of "aggressive accounting"... the stock fell 61% in a single day.

In a matter of two weeks I went from being up 3x on my investment to being down nearly 30%.

But I held on... call it arrogance or plain old hope, but I believed the stock would recover... it has to, right?

Wrong.

I ended up selling for around $2 in mid 2001... 98.1% loss.

A disaster, no way around it.

And while it's easy to say that the dotcom bubble was an anomaly and unavoidable... that's just an easy out.

In reality, if I truly looked through every filing and earnings report by the company in the late 90s and into the 2000s, I would've figured out to stay away.

But at that stage in my investing career all that mattered was the hype and buzzwords that I knew about a company, and Microstrategy seemed to have it all.

For the next 15 years I stuck to those boring ETFs and index funds, and did alright.

Then in the late 2010s I decided to revisit stock picking, but this time with true strategy and investing thesis' behind my picks.

I took up value investing in particular, because it just makes sense.

Buy a stock that's trading at a valuation that is not reflective of the company.

Graham, Buffett and Munger come to mind.

I dissected their careers, what did they do that made them so successful and how do I mirror this?

"“All intelligent investing is value investing, acquiring more than you are paying for.You must value the business in order to value the stock.” - Charlie Munger

Such a beautifully simple way to put it.

Acquire more than you are paying for... intuitive.

But no one does it.

It's not as flashy and fun as making double digit returns within minutes, but what value investing is is sustainable.

And underrated.

If done properly, like I've been attempting for the past six years, value investing can easily yield you returns well above the market.

From 2017-2023 I've made a compounded returns of just under 400%.

While the covid boom played a major part in that, the supercharged Nasdaq is up just 150% in the same time period, and the S&P500 only 65%.

Value investing doesn't have to be boring, in fact it's extremely fun.

It's like going to the car dealership and finding that the price of your dream convertible has accidentally been swapped with that of a used Nissan Altima.

You take the car and run.

Value investing is the same. You are being given stocks priced well under their true valuations all the time, you just have to find them and take all you can get.

Eventually the price will correct and you reap the returns.

While this sounds plain and easy, it can be hard to not fall into value traps.

That is, stocks that seem undervalued, but have deep underlying issues that are causing the downturn in the stock price.

These traps are often why people fail at value investing, but if you truly dig deep through 10-Ks and earnings calls, I can assure you that active value investing will return you more over the long term than any other method of investing.

Just ask Buffett.

This idea of value investing is what inspired the creation of Andy's Angle.

Value investing has become a dying art in modern investing, and I aim to be the voice that inspires investors to truly master what it means to be value investors.

From our educational series' to our actively managed value investing fund (up 41% YTD) we want to create a community of value investors that take control of their financial futures in the most efficient way possible.

As Andy's Angle continues to grow, we would like to emphasize that none of this is possible without our readers, and your feedback and support is what helps us continue to function and provide what we do.

We continue to hold ourselves to the highest standards of publishing and hope that all of our readers thoroughly enjoy and more importantly understand what we are trying to convey.

We hope to help readers breakout of the exhausting cycle of gains and losses and build something truly solid and concrete for the future.

Thank you, Feedback is Always Appreciated.

-Andy's Angle Writing Team-