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Received: 2024-06-11 | Accepted: 2024-09-28 | Published: 2024-12-30

Title

Assessment of investment returns through the prism of investment strategies: comparison of performance of the most successful investors and the Slovenian funds

Abstract

In this paper, the authors analyze the investment philosophies and strategies of three financial mogul companies to find out what strategies they apply, yielding high returns. They also analyze their performance compared to Slovenian mutual funds and the broader stock market. The authors focus on some key research hypotheses. First, they are interested in assessing and monitoring the company's future intrinsic value, which refers to a fundamental, objective value contained in a financial asset. If the market price is below this value, this financial asset may be a good buy, or if it is above, it may be a good sale. While studying the investment strategies, they check if such an assessment enables above-average investment returns. Second, the authors state that the fund's profitability and risk reflect the chosen investment strategy. Investors generally expect higher returns from riskier investments. Risk tolerance is one of the critical factors determining the return on investment. Typically, higher-risk investments have the potential for higher returns, but they also come with a greater risk of loss. The authors compare and test how the risk is embedded in the investment strategies of three renowned financial investors and Slovenia mutual funds. Third, the authors hypothesised that time and patience are among the most critical factors in investing. The authors' fourth research hypothesis relates to the question if the stock market always accurately reflect the value of individual companies. Many researchers today argue that some market participants behave irrationally, what leads to market inefficiency. They suggest that the financial market can never be perfectly efficient. In the theoretical part of the paper, the authors begin with a brief literature overview underlying how different factors affect investment returns, especially focusing on the indicator ROI. Further, they shortly represent the investment strategies of Buffett, Ackman, and Palihapitiya. In the empirical part of the paper, they perform some financial calculations — annual return, average annual return, annual standard deviation, Sharpe ratio, and then proceed with a Monte Carlo simulation and a CAPM model. The author's findings show that a deep understanding and accurate assessment of a company's intrinsic value leads to above-average returns. The risk and return of a fund are tied to the strategy chosen, with those willing to accept a higher risk often achieving higher returns. They underline the importance of time and patience in investing and observe that the stock market does not always reflect the exact value of an individual company accurately, which emphasizes the importance of critical judgement and not blindly following market trends.

Keywords

influential investors, market efficiency, stock market, intrinsic value, company valuation

JEL classifications

G14

URI

http://jssidoi.org/jesi/article/1245

DOI

DOI 10.9770/e4338524934

Pages

31-52

Funding

This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Peternel, Ema

University of Ljubljana, Ljubljana, Slovenia https://www.uni-lj.si

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Bukvič, Vladimir

GEA College, Ljubljana, Slovenia https://gea-college.si

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Journal title

Entrepreneurship and Sustainability Issues

Volume

Number

Issue date

December 2024

Issue DOI

DOI 10.9770/s6723584739

ISSN

ISSN 2345-0282 (online)

Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Article views & downloads

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References

Bernanke, B.S., & Reinhart, V.R. (2004). Conducting monetary policy at very low short-term interest rates. American Economic Review, 94(2), 85-90. https://doi.org/10.1257/0002828041302118