Value Investing Today doc

[...]... Harper & Row, 1973, p 13 2 Ibid., p xv VALUE TODAY INVESTING PA R T1 What Is Value Investing and Why It Makes Dollars and Sense The goal in Part 1 is to define value investing and establish clearly that the combination of rational fundamental analysis and irrational market prices creates opportunity for value investors As such, Part 1 is designed to address value- investing principles, illustrate whythe... the discipline and patience to accumulate substantial wealth The book includes fresh evidence reinforcing the benefits of value investing and draws on my more than 30 years in the investment industry Beyond mere facts and figures, this edition of Value Investing Today explores whythe value approach to money management has been successful since first introduced by Benjamin Graham in the 1930s I discuss... financial oceans without so much as a chart to guide them In Value Investing Today, you will find a way to design and implement a conservative and effective investment philosophy It is a philosophy, I emphasize, that has proved to be a successful means of building wealth and preserving capital WHAT TO EXPECT FROM THIS BOOK This edition of Value Investing Today has been updated with lessons designed to protect... examine the differences between value and growth investing Before I do that, I want to illustrate the margin of safety concept using two charts In Exhibit 1-1, a horizontal line represents a hypothetical company’s intrinsic value —the underlying value of the business Later in this book, I’ll explain how this value is derived For now, understand that a company’s intrinsic value does not change that often... below the company’s intrinsic value These price fluctuations create opportunities for value investors When the stock price of the company falls sufficiently below the intrinsic value, it creates a buying opportunity The shaded area between the company’s stock price and its discount to intrinsic value illustrates when value investors should consider purchasing the stock Value investors expect that over... value of the company, its share price will climb toward its intrinsic value As this happens, the margin of safety shrinks When the share price equals or exceeds the company’s intrinsic value, the margin of safety has disappeared and the shares should be sold EXHIBIT 1-1 The Margin of Safety Concept Intrinsic Value Discount to Intrinsic Value Time EXHIBIT 1-2 The Margin of Safety Concept Intrinsic Value. .. company, often called its intrinsic value Generally, value investors are not interested in stocks that trade at a slightdiscount to their underlying value Rather, they seek a substantialdiscrepancy Why? They are looking for solid companies whose stock prices are selling at “pennies on the dollar” compared with the intrinsic values of the businesses they represent Value investors believe that a large... discipline they need to succeed through value investing In addition, I share insights gleaned firsthand from Graham when I became his acquaintance INTRODUCTION xiii My main purpose in writing this book is to help you take advantage of true investment opportunities by supplying you with the principles of the most successful means of investing over the past 70 years: value investing I will admit to being a... moment In addition to the company’s intrinsic value, I show in Exhibit 1-1 an example of a value investor’s required discountto that intrinsic value In other words, this is the gap between the intrinsic value and the price at which shares of the company would be purchased Keep in mind that when purchasing shares, I seek a significantdiscount to intrinsic value, otherwise known as a large margin of safety... Benjamin Graham, widely considered the father of value investing, set down his central beliefs on how investors may achieve better-than-average results in the first chapter of his book The Intelligent Investor He suggests investors follow policies that are “inherently sound and promising” and “not popular in Wall Street.”1That’s why Value Investing Todayis important to you Finding stocks that are “inherently . What Is Value Investing and Why It Makes Dollars and Sense 1 1 What Is Value Investing ? 3 2 Behavioral Biases: Why Value Investing Works 17 3 The Value Pedigree and the Rewards of Value Investing. & Row, 1973, p. 13. 2. Ibid., p. xv. VALUE INVESTING TODAY PA R T 1 What Is Value Investing and Why It Makes Dollars and Sense The goal in Part 1 is to define value investing and establish clearly. the benefits of value investing and draws on my more than 30 years in the investment industry. Beyond mere facts and figures, this edition of Value Investing Today explores whythe value approach