Tuesday, September 28Welcome

Value Investing And The Role Of Intangibles

Value Investing And The Role Of Intangibles

What is Value Investing?

Value investment involves choosing stocks that look like being traded for lower than their book value. Value investing is generally practiced when the stock market is underwhelming. Investors believe that when something good or bad happens, the market overreacts. This results in stock price changes that don’t match with a company’s fundamentals. This price change allows you to buy stocks at a lower price.

One of the most famous value investors is Warren Buffet, while others include David Dodd, Christopher Browne, Seth Klarman, Benjamin Graham, etc. Such investors do not follow trends like sheep and do deep analysis before making a long-term investment in quality companies.

Understand Value Investment

Value investing works on a basic concept that you can buy something and save a considerable amount of money if you know it’s true value. This is the same for stocks, and even if a company’s valuation remains the same, there can be a change in its stock price. Most shoppers believe that a TV can be bought on sale multiple times a year, so there is no use in buying at its full price.

Value investors think similarly, but stocks are not sold at low prices at a particular time, and you won’t receive any notification or ads regarding their prices. Value investing involves finding out secret low prices of stocks and buying them at a price lower than their perceived market value. Most investors make a lot of money by buying stocks at discounted prices and holding them long-term.

Should you take part in value investing?

If you wish to keep losses very low and increase your returns in the stock market, then value investing is the right technique for you. However, if you like trending companies, their stock market is lukewarm, and you will not find many growth opportunities. Also, you need to be resilient while value investing because when you hunt for the best value deal, most stocks are eliminated, and in the case of a bull market, it becomes frustrating and stagnant to invest.

Most of the stocks you reject in the bull market will rise in value even though you considered them costly at the start. However, as soon as the bull market is finished, you will be rewarded because value stocks will keep you safe during a market decline.

The Role of Intangibles

A resource with long-term benefit for your company but no physical shape or form is called an intangible asset. Your business’ reputation and copyrights are intangible assets. A company has intellectual or legal rights with these assets, and this is what makes them valuable. Intangible assets can be used to purchase equipment and other wasted assets. Even though such assets aren’t present physically, they have long-term value for a company.

A company’s brand value, reputation, trademark, copyrights, etc., are some examples of intangible assets. A small business’ value can increase in the long term based on these assets. However, hardware, machinery, equipment and other tangible assets just account for a business’ current value.

Types of Intangible Assets

  1. Limited-Life – Assets like patents, goodwill, copyright, etc., are intangible assets as they have a limited time span. These assets are amortized only for a period till they are useful and not after that.
  2. Unlimited-Life – Such assets do not have a specific life term, for example, a trademark. A patent expires after its legal date, but such is not the case with a trademark. These assets are annually tested for impairment and not amortized.

Importance of Intangible Assets

Such assets demand high-level communication and management but provide an edge to a business over competitors. To work on a strategy, performance, brand value, customer relations, etc., are vital, and most of these are intangible assets. Therefore, they are vital for a company’s sustainability and profitability. Thus, every company needs to manage intangible assets in the correct manner.

Conclusion

Over the long term, value investing will surely pay you dividends. When you hold a stock for a long time, you can sell it when its price is higher than its market value and make handsome profits. We read about value investment in the above blog and how it can help you.

Also, intangible assets hold a great value for your company over a long time. If you want your company to succeed and do better than your rivals, managing intangible assets is a must.