 Good day, film investors. Over the past years, the message has been clear. Value investing is dead. I agree, especially when they define it as it is usually defined. Low price earnings, low price to book, low price to cash flows. However, there is a different definition of value investing that has worked since ever and will work forever. And that is the definition I'm going to give you to really put value investing, what is, we can call it modern value investing that will work forever, no matter that old value investing might be dead. Let me give you an explanation of value investing, old value investing, new value investing. What are the key factors to focus if you want to win when investing does really use the truth everlasting value investing? The general environment, underperforming, overperforming, that's always stocked in the media. And then at the end of the video, you will know exactly what to focus on, how to focus, how to invest, where to invest that will bring you to extremely good investing returns over your lifetime. You are not investing for the next two, three years or in this hot stock, in this hot trend. No, that's not going to bring you to returns. You have to find things that will work forever and this is what you're going to get in this video. So please subscribe to this channel, we are all about things that will work forever, that will deliver returns with low risk forever. Subscribe, like and let's start with content. So is value investing dead? Well, value investing has been usually defined as low price to book value, low price earnings ratios and low price to cash flow ratios. When you define things like that, when you define things and when you look at investments by looking into a rear view mirror, because all that data, price earnings, price to cash flow looks in the rear view mirror, then it's certainly dead because investing is about what's going to happen next, not what happened in the past. So if we look at many value investing definitions from free cash flow to enterprise value, book value to price, earnings yield, sales to price, forward earnings to price, we can see big variations in related returns. Over 15 years, book value to price over the last 15 years delivered 16%, free cash flow to enterprise value delivered 220%. So does this mean free cash flow to enterprise value works and book value to price doesn't work? No, it's simply that sometimes something works, sometimes something else, this is just statistics. Statistics looking in the rear view mirror does not relevant for long term investors. Then no one measure of value has consistently performed better than others. Some there have been price to book value has done good, price to earnings other times, price to cash flows has done better. Over the last years, price to book value did really, really bad, a little bit better price to earnings. So you never know what's going to work. Well, in general, value stocks again, defined as usual defined as Benjamin Graham discussed in his book have performed terribly over the last 10 years. If we look at the Russell 3000 value versus the Russell 3000 growth index, value stocks are up 150% while growth stocks are up what 350%. So a huge difference. And that's why people are saying, okay, value stocks are dead. If we look at the Vanguard growth versus value index funds, we can see that in the 2000s value was overperforming. But since the 2008 crisis, value is really, really underperforming, albeit a little bit better than in the Russell. So again, questionable is how they measure it. Then what is value investing and is it dead? As I said, yes, value investing, if you take a fixed measure based on the past will always be dead because you never know what will work better, what will work worse over the next five to 10 years. It's all about sentiment statistics. What you need is something that you can rely all the time on. And that's something there are three core things when it comes to value investing. The first thing is cash flow, intrinsic value. Warren Buffett defines value investing by looking at the intrinsic value of a business and then trying to buy it below that intrinsic value. How does he define intrinsic value? Well, intrinsic value is what is the number that if you are all knowing about the future and could predict all the cash that a business would give you between now and judgment day, discounted at the proper discount rate, that number is what the intrinsic value of business is. Thanks, Warren. So intrinsic value is defined as the discounted value of all the cash flows that the business is going to deliver from today to judgment day. And that's something that none of those metrics that we discussed as defining value investing give you. You have to understand the business, trying to estimate what's going to happen in the sector, in the economy, competition, what's the mode, what's everything. And then you can wrongly guess what's going to be the future cash flow that's going to be delivered to you. Wrongly, yes, but it's better to be vaguely right than precisely wrong. And then you're looking at margins of safety, looking okay, it can be 100, it can be 500, 10, 5 years from now. But that is value investing, trying to estimate future cash flows with a correct predictability, probability, and then comparing to the risks and seeing okay, where is the price now, compared to what it can be in the future. That's value investing according to Warren Buffett. Warren Buffett changed his value investing techniques since starting, since studying under Benjamin Graham, because Benjamin Graham was a statistical value investor, he simply looked at businesses trading at below cash value, bought them, bought a bunch of them, and knew that those will deliver value over time as their value unlocks. However, a lot has changed since then. First, when Buffett started investing, he would take the SAP 500 manual stock market guide, and he would read all the 1000 pages, and he would find those undervalued, uncovered stocks that were really delivering great returns for him. But he had an informational advantage. That's something you cannot have now, because all the information is out there. You go to your Bloomberg terminal, and you get all the information, thus you cannot have an informational advantage. The second advantage you can have in investing is speed or scale. You call Warren Buffett, he can get an advantage, he can lend money to buy Anadarko at 10 billion here, he can buy preferred shares of Kraft Heinz or Goldman Sachs, Bank of America. You can't do that. Plus, there are flash traders from Michael Lewis' book that have the speed, have the connectivity, again, advantage that you cannot have. The only advantage you can have is having the right mindset, and that's something that you have to focus on, creating the right mindset. That's something we focus on this channel, so please subscribe and click that like button. And what does it mean to have the right mindset? The right mindset means to look long term, look at businesses, look at things that the market isn't looking. What is it out there that the market isn't looking? The market isn't looking for long-term competitive advantages, for undervalued long-term cash flows, or for cash flows that are going to come not in the next three, five quarters, but that are going to come in the next three, five years. That's something the market isn't looking. Everybody's focused, okay, I need to beat my competitors in the next 12 months, not five years, and therefore that gives you an advantage. Thirdly, the market isn't focused on another core thing of value investing, and that's risk. Value investing is focused on risk, and you try to avoid... The first rule of investment is don't lose, and the second rule of investment is don't forget the first rule, and that's all the rules there are. I mean, that if you buy things for far below what they're worth, and you buy a group of them, you basically don't lose money. Thank you, Warren. You try to avoid losing money, because the first rule of investing is don't lose money, the second rule is don't forget rule number one. When you compare those cash flows, and you look for a margin of safety, not to lose money, then the downside remains limited, and the upside is unlimited. That is what is core everlasting value investing. Do you see the difference between value investing defined from whoever wants to be a value investor or whoever calls value investing dead, and value investing defined in a buffet way, and that will work forever. Buffet defines value investing as cash flows and a margin of safety. If I'm wrong, what do I fall onto? What gives me protection? If I'm right, what's the upside? Not past price to cash flow, price to sales or something. Even if I think that even those past metrics might work very, very well in the future, let's see. So when you're looking at value investing and you look at the price to book value, over the 90 years that Kenneth French and Eugene Fama have given us the data to calculate, price to book value has outperformed growth investing in 84 of the 90 years. If this was up to 2016 measure, so if we add the three years over the last three years that value investing didn't outperform, so value investing outperformed growth investing in 84 of the last 94 years, so 84 of 94. So one in nine years, over the next 10 years when you measure returns, growth investing will do better. So statistically, I think that value investing will continue to do good. It's just that there are periods when value investing doesn't outperform, like the 1990s, like now when growth stocks were really, really hot. And then here is the chart showing the difference between growth stocks and value stocks. You can see here, this is the last 10 years when looking at performance, it has been flat underperforming growth stocks. But over the last 70, 80, 90 years, I think the message is clear about value investing, especially because price to book value, now it can be measured differently, but gives you a sense of protection. And we have seen only increasing rising markets over the last 10 years, so value investing, the margin of safety didn't matter that much because everything goes up. Rising tide lifts all boats. So it isn't the first time that value stocks disappointed investors for a long time. We have seen similar performance in the 1990s.com bubble and you all know what happened lately. And then US value stocks have rarely been this cheap relative to growth. So five times cheaper relative to valuations. Will there be a mean reversal? I don't know. I don't care because I look at cash flows and I look at future cash flows and risk. Historically, there was always a mean reversal. So you see, when value stocks were very cheap and underperformed the market, the forward 10 year premium returns were very positive and vice versa. When value was doing really good, the next 10 year returns were very bad. To conclude on this data overview from Kenneth French library, value outperformed growth by an average of 4.6 percentage points per annum. So the market average was 8%, growth was 5.7% and value was 10.3%. The differences are staggering. So if you just invest 100,000 over 10 years, 5.7%, 174,000, 10.3%, 266,000, those are staggering differences. If you do the same over 50 years, the difference is amazing. And that's what it is all about. That's what it is all about. You're not investing over the next 5, 10 years. You're investing over the next 20, 30, 40 indefinitely probably if you will leave your wealth to your children or you want to live off their wealth for as long as it goes. So if you are promiscuous about your investing styles, sooner or later your portfolio will get the disease. But if you focus on cash flows and if you focus on managing risk, that's all you need and that is real. Everlasting, modern value investing, Warren and Buffett has been applying. To conclude, there are three things you have to remember. Cash flows from today to judgment day. This counted at whatever rate you want to reach and then you can compare things. Managing risk, don't lose money, allow those cash flows to compound no matter what happens. We cannot predict the future. And the third key is of course, subscribe to this channel for the correct mindset when it comes to investing. I'm always amazed by JP Morgan's chart that shows that the markets did good, reach did good, everything did good. But the average investor over the last 20 years did terribly because they don't have the right mindset. They are always chasing the hot trend, the hot stock, what worked in the past. They always investing with the rear view mirror, looking at, oh, free cash flow to enterprise value looked good. Let's buy that. Let's do that. And that's not the way to invest. And therefore you get those terrible returns instead of getting the great returns. So long-term investing, having the right mindset, subscribe to the channel. And if you want to see the stocks I'm researching that I'm investing in that have 50 years of production ahead, competitive advantages that are the best in their sector and that will be great no matter what happens with the economy long-term, then please check my stock market research platform in the link below. And you have all my website, you have many articles, mindset, research stocks that I have there publishing. So please check that out. And I'll see you in the next video.