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VALUE INVESTING
By
Today we launch my value newsletter. It's an exciting time for us at TMF in general, and myself in particular, since it's our, and my, first such publication although TMF US has produced subscription newsletters for some time. I've doubled the excitement by getting myself a great new motorcycle which I collected yesterday to replace the one that was nicked a couple of months ago. I've included three tips of my own in the first issue. There is also a selection from another TMF writer, Maynard Paton. My three tips consist of a main value tip, a second more speculative value share and a long term hold high yield portfolio suggestion. My value selections are well known to the small group of experienced value players here on the Fool but the newsletter is intended to appeal to a much wider circle of investors seeking to utilise the value style or simply to find an approach that works consistently. For the high yield portfolio (HYP) section I intend to show newsletter readers how to build up a diversified HYP by featuring one share per issue. Many smaller investors like the HYP strategy, especially the growth version with reinvested dividends, but don't have the lump sums to go for it all at once. Consequently, they are forced to buy in stages and this is the reader I am addressing with the HYP feature. I have not though limited myself to any rules such as no-dabbling, or fixed portfolio size as I did for the HYPs I feature here on our main site. I remain of the opinion that HYPs are one of the lowest risk and highest long term reward strategies for the private investor, whether for income or growth, who does not wish to trade regularly. My own holdings at present are still primarily Lloyds TSB (LSE: LLOY), a bit of pocket money in Anglo Pacific (LSE: APF) and a dollop of cash. Ironically perhaps, in view of our own newsletter launch, it seems that Anglo was mentioned in a tipsheet recently which caused it to put on a few pence. I'm not complaining. I've not read the article but apparently it talks of a target price of 70p someone mentioned. If true, I don't like that approach. My advice to value players is to forget targets, intrinsic value, real value and similar nonsense. Targets take your mind off the target and anyway none of these things exist outside of your head. The only real value it has is the current value. Whilst hoping of course that the price will rise, a value investor should not prejudge when to exit but fly by the seat of their pants and continually re-assess the share in the light of the latest figures and news, not forgetting contrarian press opinion. Once enough value has gone, dump and don't look back. Lloyds has also been rising a bit of late though I'm still down a little on my average buying price, or around break even if I include dividends received. As I keep saying, there isn't a fag paper's thickness between Lloyds and the other big banks. Those who think there is are mistaken in my view and consequently Lloyds relative undervaluation, both to other banks and to the market, on a very high yield of over 7% is undeserved. That could change of course if its dividend was cut, which is always a possibility. So back to the value newsletter. Value works over time for those with the necessary patience to follow it. I know that, as do many other investors who have followed the style. Shares involve risk which means that not every play wins, but enough do to make it a success overall. Value by definition will always be a minority game because it involves buying that which most others do not, and precisely by not doing so they create the opportunities we seek. This process is not going to stop working just because I publish a newsletter on it. To be frank, I've always been surprised that nobody else has published something similar before. Consider that situation rectified.