Recommended Reading│Value Investing in the Digital Age: Between Orthodoxy and Heresy│Jiho Yoon
Disclaimer
A Guide to Understanding Terminology
Introduction│The Big Tech Wave: Too Big, Too Fast

Part 1: Technological Advancement and the Birth of Value 3.0

Chapter 1: The World Has Changed
A crash without English
Buffett's massive purchase of Apple
Sanders' tech investments

Chapter 2 [Value 1.0] Benjamin Graham and the Age of Asset Value
The first successful case of securities analysis
Northern Pipeline asset value
After the Great Crash of 1929
Value reached its limit 1.0
Graham after retirement

Chapter 3 [Value 2.0] Warren Buffett and the Brand-TV Ecosystem
The influence of John Burr Williams
Geico, a new investment platform
The days when we had to pay tolls to broadcasting stations
Growth potential over price
Buffett Achieves 'Unparalleled' Record
The broadcasting ecosystem is dying
Everyone is jumping into the digital race

Chapter 4 [Value 3.0] BMP Template and Earning Power
Heico's business quality
Heiko's management
Price weighting in BMP
New Valuation Indicator: Earnings Power
Comparative Analysis of Earnings Power between Campbell and Intuit

Part 2: Practical Investing in Tech and Non-Tech Stocks

Chapter 5: Competitive Advantage Then and Now
A case of being fooled by rapid growth and popularity
Moat 1.0.
low-cost producers
Moat 2.0.
Brand
Platform and switching costs
First mover, fast mover
Winner-takes-all network effects
The immense value of digital networks

Chapter 6: Best Management for Shareholders
Do you think and act like an owner?
Do you know the key factors that increase business value?
Best Practices Analysis, Tom Murphy
Frugal but not stingy?
Do you understand the drivers of shareholder value?
Do you know how to combine the old and new economies well?
The Correlation Between CEO Salary and Stock Price

Chapter 7: Valuation Tools for Value 3.0
Valuation tools to consider
Tools to keep but modify
Adjustments and Solutions to General Accounting Principles

Chapter 8 Earnings Power PER Calculation Case: Amazon
Step 1.
Amazon's 3-year revenue forecast
Step 2.
Adjusting profit rates to reflect economic realities
Amazon's Earnings Power PER

Chapter 9 BMP Template Case Study: Alphabet and Intuit
1.
Alphabet BMP Analysis
Post-hoc verification of analysis

2.
Intuit BMP Analysis
Post-hoc verification of analysis

Chapter 10: Key Questions for Successful Investment in Non-Tech Stocks
Is it technology resistant?
Are there any technical elements that would add to the excellence?
Do you also provide services to low-income people?

The final piece of the puzzle that will boost your investment performance

Chapter 11: Finding Attractive Investment Targets
Turning Industry Expertise into a Competitive Advantage
Leveraging Everyday Consumer Experiences
Acknowledge the digital divide between generations
Advice for Young Investors
Advice for Older Investors

Chapter 12: Tips for the Investment Process and Prioritizing Investments
Be quick but don't rush
Expand your scope of capabilities
Acquire a lot of quality information
Use Mr. Market to your advantage
Don't diversify your investments
Understand your investment tolerance
Invest regularly and for the long term
Speculation is as dangerous as adultery.
Should I invest in cryptocurrency?
Reddit and meme stocks like 'Planet of the Apes'
About the social responsibility of 'socially responsible investment'

Chapter 13: Regulation and Innovation: The Second Half of the Chessboard
Regulation by anti-monopolist
The 60th square on the chessboard
A 'long-lasting' competitive advantage, not a 'permanent' one.

Glossary of Terms
Unlock│Tech on Me, Beyond Legacy!│Hong Young-pyo
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The world has changed, and so has the standard for "value."
- Tech stock valuation indicators supplemented for the digital age

The author, who had been making profits by running an asset management company using Benjamin Graham's value investing method, began recording dire losses around 2014.
At the same time, tech stocks like Google, Amazon, and Intuit were soaring.
While questioning the value investing approach, he began to see results by buying "expensive" tech stocks that appeared overvalued.
However, there was no confidence in investing in tech stocks.

Then, in 2016, Berkshire Hathaway purchased $7 billion worth of Apple stock.
The fact that Warren Buffett, a quintessential value investor, made a large purchase of 'Big Tech' stocks was an unusual event that surprised value investors around the world.
The author decided to attend the Berkshire Hathaway annual meeting and hear Buffett's story.


At Berkshire's 2017 annual meeting, Buffett said, "This is a completely different world than we've ever known, and that's not going to end," and Charlie Munger said, "Our biggest mistake was not investing in Google."
Since then, the author has become more confident in investing in tech stocks and developed a "Value Investing 3.0" investment method that reflects changes in the world through value.
Gravity Capital (founded by the author), which began purchasing undervalued tech stocks using this method, achieved returns that outperformed the market by approximately 20% from 2021 to the first half of 2023 (Barron's, March 9, 2023).


What's the fundamental reason traditional value investors are reluctant to invest in tech stocks? It's because tech stocks are overvalued based on fundamental price-to-earnings ratios (PERs) and price-to-book ratios (PBRs).
Through analysis of several big tech companies, the author reveals that they are overvalued based on financial statement PER but undervalued based on the earnings power PER he devised.
Even when a stock looks cheap based on its financial statement PER, you should be cautious, as this may not be because the company is attractive, but because its outlook is poor.
The criteria for determining whether an undervalued company is a 'good' company are explained in detail in the text.

A simple and clear tech stock valuation indicator
- BMP template, Earning Power and Earning Power PER

The first tool for finding undervalued "good" tech stocks is the BMP (business, management, price) template.
B is for business quality.
There are three things to check in business: is the market share low? Is the market large and growing? Does it have a clear competitive advantage?


M is for management.
Two key points to check are whether the management thinks and acts like the owners of the company and whether they know the key factors that increase business value.
Capital City CEO Tom Murphy and Amazon's Jeff Bezos are considered exemplary cases. If the BM total score is 4 or 5 out of 5, the company moves on to the P (Price Evaluation) process.


P is the stock price.
The stock price must pass the criteria of a 5% return and a PER of 20 times.
The problem is that you can't trust PER.
If we apply the net income from the financial statements as is, 'good' tech stocks that invest heavily in R&D and marketing will appear to be overvalued due to their high PER.
However, the sales and profit figures of tech companies listed on their financial statements are distorted, and earnings power is what corrects this distortion.


The author defines earnings power as "an attempt to quantify the potential and fundamental capabilities of profit-generating tech companies" (p. 139), and evaluates the value of major big tech companies using the "earnings power PER" based on earnings power.
The text details the earnings power of US tech stocks, including Amazon, Alphabet, and Intuit, as well as examples of calculating earnings power PER and BMP analysis.

Tech Stocks' Competitive Advantage and Non-Tech Stocks' BMP Analysis Method
- Platform companies, switching costs, first-mover advantage, network effects, etc.

The most important criterion for a 'good' tech stock is the B in BMP, Business.
The author calls the factor that determines business quality 'competitive advantage', which is the same concept as what Buffett calls a 'moat'.
The author lists platform companies, switching costs, first-mover advantage, and network effects as the competitive advantages of Value 3.0 companies, also known as "Moat 3.0."
This will serve as a benchmark for long-term tech holdings, and is detailed in Chapter 5 through various corporate examples, including Apple, Amazon, and Tesla.

The BMP analysis framework is also useful for non-tech stocks.
The B-Tech Business (B) quality is assessed based on three criteria: 'is it technology resistant?', 'is it a non-tech company with technology?', and 'does it provide services to low-income people?'
It includes case studies of various companies, including a paint company (Sherwin-Williams), a credit information company (Equifax), and a low-cost grocery store (Dollar General).

The final three parts provide tips for different investment types and situations.
There is a lot of practical content that will help you improve your investment performance.
We've also compiled information on a variety of investment products that are currently trending, including socially responsible investing (SRI), environmental, social, and governance (ESG) investing, and impact investing.


Chapter 12 describes the Reddit collective action incident that attributed the financial crisis to stock short selling.
Regarding this situation, which brings us to the fundamental question of 'what kind of place is the capitalist market?', the author warns that the market is neither a place to punish wrongdoers nor a place for good deeds, and that if consumers are deceived by promotional slogans and purchase a product, the loss will be entirely borne by the consumer.


Finally, the author uses the anecdote of the 'second half of the chessboard' as a metaphor to predict that by 2057, computer performance will be 575 quadrillion times more powerful than when the integrated circuit was first invented.
The book concludes with the implication that no legal regulation can stop the wave of Big Tech and that its heyday will be prolonged.