Part III – Investing in Value

Part III discusses the process of investing in enterprise value for both public and private companies.

Part III begins with the article, Steps to Investing in Enterprise Value. You can access this article by clicking the link below.

Steps to Investing in Enterprise Value

The Intrinsic Value Style of Investment Management, which serves as the foundation for investing in enterprise value, is described in the following article.

IV Style of Investment Management

The Intrinsic Value Style of Investment Management, which serves as the foundation for investing in enterprise value, is described in more detail in the following article.

Investment Research and Management White Paper

The Value Creation Process Chart shows graphically how value is created. The accompanying description of the chart discusses each of the elements in the chart, their relationship to one another, and further defines how value  is created.

Value Creation Process Chart

Value Creation Process Chart Description

The Value Drivers Possibilities Frontier is an exact description of the value creation process, whereas the Value Creation Process Chart discussed above is a summary of the process. The Value drivers Possibilities Frontier is discussed at length in the paper, A Theory of Value Drivers: A Grounded Theory Study, which can be found in Part I of this workbook.

Value Drivers Possibilities Frontier

The Intrinsic Value Line (TM) is a new concept introduced by value driver theory. The following article discusses the concepts of intrinsic value, the Intrinsic Value Line (TM), and Intrinsic Value Added (TM).

Intrinsic Value and the Intrinsic Value Line

The Cassandra Stock Selection Model (TM) is a proprietary, quantitative model of Paul M. Wendee & Associates, LLC. It is designed to screen and pre-qualify stock candidates from a large universe of publicly traded stocks. The 6 Factor Model (TM) is a model developed by Paul M. Wendee & Associates, LLC to provide a rigorous and disciplined approach to the analysis of public and private companies. The 6 Factor Model (TM) is used to conduct further extensive analysis of stock candidates that are selected using the Cassandra Stock Selection Model (TM) or other stock selection processes. The chart below shows the Cassandra stock Selection Model (TM), the 6 Factor Model (TM), the portfolio management process, and the feedback loop that is used by Paul M. Wendee & Associates, LLC in investment research and analysis.

Cassandra Stock Selection and 6 Factor Models

The brief discussion that follows places the Cassandra Stock Selection Model (TM) in the context of Greek Mythology, and describes how the name for the model was derived.

Cassandra in Greek Mythology

The chart that follows, taken from the August 10, 2018 issue of the Wall Street Journal, shows clearly that low P/E stocks (lower valuations) tend to outperform high P/E stocks (higher valuations) over the long term.

S&P 500 Forward PE and Annualized 10 Year Returns_000016

The 5 Minute ReviewTM was written as a checklist for angel investors and others that invest in private companies. Using The 5 Minute ReviewTM in conjunction with the 6 Factor ModelTM will allow you to conduct a very comprehensive review of the private companies in which you have an interest to invest.

5 Minute Review v5

Management tools are a key part of the value creation process. They provide the essential link between the value drivers present in an organization and the creation of value in the organization. The following article discusses management tools.

Management Tools

The Socrates Model (TM) is designed as a complete, all encompassing analysis model for the review and analysis of any investment. It is still in development, but is included here at the present time as parts of the model are fully functional and may be useful for our subscribers.

Socrates Model (TM)

It is important to have an understanding of where the economy is today, where it is going, and what major factors are driving economic growth. This article discusses a simple approach to economic forecasting that can answer these questions.

Simple & Effective Econ White Paper

This Hypothetical Performance Study is intended to show the nature and potential of theIntrinsic Value Style of Investment Management.  The Intrinsic Value Style of Investment Management is a long-term approach to investment, and therefore investment gains are expected to be realized over a 3 to 5 year time horizon. The results in this study are based on actual research reports that were written by Paul M. Wendee over the period 1996 through the ending date of this hypothetical performance study, August 31, 2000.  While the oldest reports were still under our optimal 5 year holding period, the High Price Gain column in the study, which has an average return of 89.51%, demonstrates the appreciation potential of picking stocks at or below their estimated intrinsic values and holding them over the long-term. Click the Track Record Study hyperlink below to view the results of this study.

Track Record Study