Why Do I Base My Investments On Value?
Until now most investors didn't have the understanding and tools to invest successfully. The True Stock Value Approach to investing provides investors the ability to accurately determine the value of a stock and finally secure their super investor status. Investors such as Warren Buffett have used this approach to investing to reap outstanding returns year after year.
Warren Buffett wrote in his 2000 Annual Report, "To be sure, an investor needs some general understanding of business economics as well as the ability to think independently. But the investor does not need brilliance or blinding insight."
Businesses strive to gain an edge which differentiates them from competitors which allows them to make more profits. Businesses can differentiate by performing different activities or perform similar activities in different ways. The competitiveness of the capitalist system makes it difficult for businesses to make extraordinary profits over long periods of time.
For example, if the business is found to be profitable, competitors are going to try to imitate the company to share in its profits. To fight back the business will strive to gain sustainable differentiation from their competition through its brand, scale, and technology to help them earn profits in excess of their competition. The challenge for the business is to continue to make the right investments in its brand, scale, and technology to keep it ahead of its competition.
Ben Graham, Buffett's teacher, says in a lecture on speculation in relation to security analysis, “An investment operation is one which, on thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative...And what is most important and most dangerous, we all want to get more out of Wall Street than we deserve for the work we put in."
In Security Analysis: 1940 Edition by Ben Graham and David Dodd Graham, it states in the introduction, "We are concerned, however, with common stock investment, which we shall define provisionally as purchases based upon analysis of value and controlled by definite standards of safety of principal. If we were to look at current practice to discern what these standards are, we find little beyond the rather indefinite concept that 'a good stock is a good investment.' But although the stock market has very definite and apparently logical ideas as to the quality of the common stocks that it buys for investment, its quantitative standards -- governing the relation of price to determinable value -- are so indefinite as to be almost nonexistent."
Ben Graham wrote in The Intelligent Investor, "Where the speculator follows market trends, the investor uses discipline, research, and his analytical ability to make unpopular but sound investments in bargains relative to asset value. Graham coaches the investor to develop a rational plan for buying stocks and bonds, and he argues that this plan must be a bulwark against emotional behavior that will always be tempting during abrupt bull and bear markets."
The True Stock Value is determined through logic and reason. Irrational fear and hope or the mindless imitation of others play no part in this investment methodology. By following the True Stock Value approach, you will gain confidence in your investment decisions and improve your investment performance.
As a word of caution, Warren Buffett once said in his annual letters, "Indeed, if you aren't certain that you understand and can value your business far better than Mr. Market you don't belong in the game. As they say in poker, 'If you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy'."
Who makes Value Stock Picks
What is the Value of Stock
Where do I Determine Stock Value
When are there Stock Market Values
Why do I Base My Investments on Value
How Do I Determine Stock Values
Diversify To Where You Are Comfortable With Daily And Even Yearly Price Fluctuations
Never Risk Money You Can't Afford To Lose
Be Fearful When Others Are Greedy and Greedy When Others Are Fearful