Value investing – a proven philosophy to successfully navigate volatile markets

Value investing – a proven philosophy to successfully navigate volatile markets

Oct 4, 2023 | 0 comments

Value investing is a time-tested investment approach that focuses on buying shares that are priced below their intrinsic value. “Our view is that this strategy is right for pretty much any market conditions, but particularly during periods of heightened stock market volatility,” says Nic van Schalkwyk – Director at Integrity Asset Management.

Periods of heightened market volatility are often a result of investors reacting to short-term negative news headlines. As shareholders panic, they mistakenly make an emotional decision to sell their shares, even if those shares are worth more than what they are being bought and sold for on the market. This indiscriminate selling provides opportunities for value investors to purchase the shares of undervalued businesses after thoroughly researching the long-term fundamentals of the business.

In good company

Benjamin Graham, often referred to as the father of value investing, defines intrinsic value as “the discounted value of the future stream of earnings.” Warren Buffett, one of the best-known investors in the world, and a value investor, applies an even simpler approach “I buy stocks at a price that I believe will produce satisfactory results over a long period of time.”

When determining a stock’s intrinsic value, there are a few key considerations, these include The company’s earnings profile, cash flows, the strength of the company’s balance sheet, and the quality of its management team. If a business proves to score well across these quantitative and qualitative categories while trading at a price below its intrinsic value then this would be a share that a value investor would be on the lookout for.

It takes patience and time

During periods of sustained stock market volatility, value investors must embrace the mantra of patience being a virtue. To avoid falling into the trap of panic selling, value investors must reassess the reasons why they invested in this business to ensure the business fundamentals have not changed.

Some tips to consider if you too would like to adopt a value investing mindset:

Strong fundamentals are key: Look for businesses that demonstrate a robust track record of profitability and growth. These should further be supported by a robust balance sheet and of course a management team with proven credentials.

Be patient, time is your friend: The market may be slow in seeing the true value of a business. If you have invested for the right reasons, then there is nothing wrong with holding onto the share, even if others are selling them.

Diversification will help: Spreading your investment risk is always a good idea. Follow the same process when selecting other shares to round out your value investment strategy.

As we close, value investing is a robust strategy that has the potential to yield robust results in any market conditions. However, it particularly shines during periods of heightened market volatility, as these periods offer up a greater number of opportunities to a value investor.

Are you interested in finding out more about our value investment philosophy? Connect with Integrity Asset Management and let us help you navigate your value investing journey.

For more information on this article or to discuss solutions provided by Integrity Asset Management, please contact us at:

Tel: (021) 671 2112
Cell: 072 513 2684 / 084 601 1025
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