In 2002, Fool.com recommended some of Bob Olstein's wisdom on value investing. I am a huge fan of value investing and do believe in the right hands, it can be used to consistently beat the market. Despite the passage of five years, it is still worth reading:

1. Buying companies with excess cash flow (more cash coming in than going out) is the best defensive maneuver against financial risk.

2. Volatility does not represent risk but creates opportunity.

3. Risk is defined by financial strength, predictability of cash flow, and quality of earnings; as opposed to the size of company, number of years in business, and the volatility of the stock.

4. We would rather spend one night with a company's financial statement looking behind the numbers via an inferential analysis, rather than one day with management. Management is not the answer to error avoidance and defensive investing.

5. Waiting for the catalyst to appear before buying an undervalued stock will result in the purchase of a fully valued stock.

6. The timing in value investing comes from paying the right price. Unfortunately, the right price usually occurs in conjunction with negative business fundamentals and/or periods of negative psychology.

7. The most important virtue of a value investor is patience. Periods of misperception usually take longer periods of time to unwind, but the rewards for patience can produce the returns you seek.

8. You cannot limit your search for value. Value can occur in large companies, small companies, cyclical companies, growth companies, technology companies, etc. Setting up artificial barriers to investing can be performance limiting.

9. Having a strict sell discipline based on cash flow valuations rather than the price momentum of a stock is difficult to practice, but it is a required discipline of a value investor.

10. Never allow tax decisions to take precedence over investment decisions. Any overvalued stock should be sold regardless of tax consequences. We hope your biggest investment problem is high taxes produced by high profits.