As all the regular readers of the Investment Academy already know, the value investing It is based on the search for good companies at low prices, that is, it consists of finding bargains in the markets. In this article we will analyze 7 reasons why there are undervalued companies in the stock market according to the investor Álvaro Guzmán de Lázaro.
Without undervalued companies, there would be no value investing
Some academic theories, such as the “efficient market theory”, postulate that all assets quoted in the market are priced at a price equal to their intrinsic value, so it would be impossible to obtain returns above the market for a reason other than pure chance. Fortunately, the theory of value investing exemplified in allegory of Mister Market shows us that the stock market is very far from being considered an efficient market.
Practice has also shown with countless examples how it is possible to outperform the market in a sustained manner by applying the principles of value investing. One of the people who has managed to consistently beat the market is the Spanish investor Álvaro Guzmán de Lázaro, investment manager of Bestinver. Next, we will expose the 7 reasons why there are undervalued companies in the stock market.
7 reasons why there are companies undervalued on the stock market according to Álvaro Guzmán de Lázaro
This list of reasons why there are bargains on the stock market is based on Álvaro de Guzmán's conference at the III Personal Finance Forum organized by the social network for investors Rankia and Forinvest.
- Family companies: They tend to trade at lower prices because they lack opability, that is, it is difficult for them to be acquired by third parties through a takeover bid.
- Non-voting shares: They tend to trade at a lower price than voting shares. Not all companies have non-voting shares, only a few like the German carmaker BMW.
- Companies that are listed in places other than where their highest turnover comes from: This generates price inefficiencies due to the possible lack of follow-up by stock market analysts.
- Companies with long-term projects: These companies can take a long time to generate returns so they are only in demand from investors with greater patience.
- Small companies: These companies are often followed by few analysts, so they are usually relatively unknown to the general public. In Spain we can find this type of company in the Alternative Stock Market (MAB).
- Companies with complex structures: For example, holding companies made up of different companies, which can house others within them.
- The business cycleCyclical companies tend to trade at good prices in the lower part of the cycle and rebound at the high end.
Lecture by Álvaro Guzmán de Lázaro in Forinvest
I think it is worth watching the entire video of Álvaro de Guzmán's conference at the Personal Finance Forum organized by Rankia in Forinvest, so I leave it here for you to enjoy.