Principles of Progressive Value Investing

Chapter 4 - Principles of Progressive Value Investing

Chapter 4, Principles of Progressive Value Investing, deals with the value investing principles. The chapter starts with the progressive valuation analysis and market economy and then deep dives into important topics of Progressive Value Investing, namely, Investment capital, Structures, and Principles.

A speculative stock might make you a quick million, but a value stock can make you a billion.

— Progressive Valuation, Topic 4.1, Chapter 4

The main objective of Progressive Value Investing is to pursue retail investors to participate in the stock market at all times irrespective of the bull or bear market, or whether the market is rational or otherwise, by adopting Progressive Value Investing principles.

Topics covered

  • 4.1Progressive Valuation
    • 4.1.1Market Valuation
    • 4.1.2Reasonable Valuation
    • 4.1.3Lower Valuation
  • 4.2Market Economy
    • 4.2.1Capitalism
    • 4.2.2Socio-capitalism
    • 4.2.3Inflation Fabric
    • 4.2.4Business Responsibility
    • 4.2.5Shareholder Responsibility
  • 4.3Investment Capital
    • 4.3.1Splurge Responsibly
    • 4.3.2Earnings and Debt
    • 4.3.3Savings and Cash
      • 4.3.3-1Core Savings
      • 4.3.3-2Surplus Cash
      • 4.3.3-3Savings Allocation
  • 4.4Investment Structures
    • 4.4.1PVA Structures
      • 4.4.1-1Triangle Structure
      • 4.4.1-2Column Structure
    • 4.4.2PVA Quadrants
      • 4.4.2-1Participation Quadrant
      • 4.4.2-2Association Quadrant
      • 4.4.2-3Accumulation Quadrant
      • 4.4.2-4Touchdown Quadrant
    • 4.4.3Progressive Step
    • 4.4.4Value Re-balancing
  • 4.5Investment Principles
    • 4.5.1Value Investing
      • 4.5.1-1Value Price
      • 4.5.1-2Value Growth
      • 4.5.1-3Price vs Growth
    • 4.5.2Decisions and Outcomes
      • 4.5.2-1Duck and Ducklings
    • 4.5.3Long-term Safety
      • 4.5.3-1Short-term Profits
      • 4.5.3-2Intrinsic Value
      • 4.5.3-3Margin of Safety
    • 4.5.4Opportunity Cost
      • 4.5.4-1Investable Capital
      • 4.5.4-2Decisiveness
    • 4.5.5Conventional Investing
      • 4.5.5-1Always Buy Value
      • 4.5.5-2Never Short Sell
    • 4.5.6Portfolio Minimization
    • 4.5.7Portfolio Diversification
      • 4.5.7-1Horizontal Scaling
      • 4.5.7-2Vertical Scaling
      • 4.5.7-3Natural Scaling

Summary

The chapter Principles of Progressive Value Investing deals with the investing principles concerning Progressive Value Investing. The Progressive Valuation describes the three valuation steps, namely market valuation, reasonable valuation, and lower valuation, to accumulate shares of a good company.

The Market Economy talks about how to balance capitalism with moderate socialism. This topic also introduces the concept of Inflation Fabric and its effects on economic opportunities. The subtopics: Business Responsibility and Shareholder Responsibility describes company and shareholder moral responsibilities, respectively.

The topic Investment Capital shows how investors should manage their earnings and debt. Defines core savings (C-SAVE) and surplus cash (S-CASH) accounts and illustrates the income and expense statement considering savings allocation priority list.

The Investment Structures topic concentrates on the modeling of Progressive Value Investing. Introduces the concepts of Predetermined Value Allocation (PVA) and explains PVA Structures and PVA Quadrants in detail. Progressive Step and Value Re-balancing are the two PVA capital allocation calibration methods that maximize the long-term return on invested capital.

Investment Principles discusses Value Investing and defines Value Price and Value Growth styles of investing. Explains Virtual and Real Margin of Safety with an example. Opportunity Cost and Conventional Investing principles describe how to maximize the investment returns. Portfolio Minimization shows how the portfolio return is inversely proportional to portfolio size. The Portfolio Diversification subtopic describes the Horizontal, Vertical, and Natural Scaling of the investment portfolio.