At Lowes Wealth Management, we use a strict value investment philosophy. We believe this provides by far the best way to consistently generate superior returns, whilst minimising risks.

This belief has been more than borne out by our performance over the last 3 years.

What is Value Investment?

Value investment is in essence a very simple concept. It is merely seeking to buy something for considerably less than its real worth. Although simple to state, the actual practice of value investment involves detailed research and tremendous discipline.

Value investment rests on a distinction between a company's market value (determined by its share price) and its real (or "intrinsic") value, which is a reflection of its underlying business strengths and weaknesses.

In the short term, emotional factors such as fear and greed can have an outsize effect on the market, driving a company's share price (and therefore its market value) considerably higher or lower than its intrinsic value. However, over the longer term, the underlying strengths or weaknesses of the business that are captured in the intrinsic value will have the pre-eminent effect on the company's share price, meaning that the share price will move to more accurately reflect the company's intrinsic value.

The value investor looks to invest in companies that are substantially undervalued by the stock market. Over the longer term, the share prices of such companies are likely to rise dramatically as their underlying qualities become apparent.

Value investment generally involves a long-term buy and hold approach to investment.

History

Benjamin Graham (1894-1976) is considered the father of value investment. He formalised his ideas in the book Security Analysis (1934) and published his wider investment philosophy in The Intelligent Investor in (1949). Both books are still available today.

Graham's writings transformed investment analysis into a rigorous discipline. The New York Society of Security Analysts wrote that Graham 'is to investing what Euclid is to geometry'.

As well as being one of the most successful investors of all time, Graham also taught a course in value investment theory at Columbia University. Many of the greatest investors of the last 50 years began their investment careers as his students.

One such student was Warren Buffett. After studying under Graham, Buffett asked if he could work in Graham's company. Buffett worked under Graham until Graham's retirement, whereupon Buffett struck out on his own.

Global Diversification

Our global mandate provides us with the opportunity to achieve higher returns, as well as enabling us to more successfully diversify away investment risk.

Given that the success of value investment depends on locating companies that offer the greatest margins of safety, why should the search be limited to one geographical area? Logically, being able to select companies from around the world maximises the chances of finding the best value available.

At the same time, a global mandate allows for greater risk reduction through diversification than a strategy focused on a single country. We apply limits to levels of exposure to ensure that we are not over-exposed to single economies (or industries). Not only can the portfolio be diversified by exposure to different currencies and geographic regions, but the portfolio can be overweight or underweight in different countries (or industries) depending on their position in the economic cycle.

Our global flexibility allows us to seek the best value available, whilst reducing or eliminating exposure to areas where we feel the economic headwinds may be too strong.

Our goal is to substantially outperform major markets, whilst maintaining a comparatively low level of risk. Since we began trading, we have more than achieved this.