Value InvestingVijay13206OM SRI SAI RAM

Tony Gauvin, 2007

BasicsValue Investing is the strategy of selecting stocks that trade for much less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. The result is an opportunity for value investors to profit by buying when the price is deflated.The big problem for value investing is estimating intrinsic value. To avoid this they go for high margins of safety.

How Stocks Become UndervaluedMarket Momentum andHerd MentalityBubblesand Market CrashesThe Stock Is UnnoticedThe Stock Isn't GlamorousA Company Announces Bad NewsOne Part of the company is Underperforming, but Other Parts Are Still StrongThe stock doesn't meet analysts' ExpectationsThe Stock IsCyclical

The Different Faces of Value InvestingPassive Screeners: screening for stocks that have characteristics that you believe identify are under valued. You are hoping to find market mistakes through the screens.Contrarian Investors: implicit assumption is that markets over react.Activist Value Investors: These are investors who invest in poorly managed and poorly run firms but then try to change the way the companies are run. Tony Gauvin, 2007

Tony Gauvin, 2007

Pros Cons Pros Reduces long-term risk oflosing moneyby choosing investments with high margin of safetyHot stock tips, hype, and mass hysteria do not affect the decisions, a value investor makesCan produce steady, consistent gains that regularly outperform most benchmarks

Cons Value investing is extremely taxing to the average personIt requires an unusual level of confidence - time-horizon.Value Investors must be willing to remain within theircircle of competenceand invest only in businesses they fully understand.

Price-to-Earnings RatioPrice-to-Book RatioDebt-EquityFree Cash FlowPEG Ratio 5 Important Metrics For Value Investors

Tips for Value InvestorsBuy BusinessesLove the Business You BuySimple Is BestLook for Owners, Not ManagersWhen You Find a Good Thing, Buy a LotMeasure Against Your Best InvestmentIgnore the Market 99% of the Time

Warren Buffett's rules of investing:Don't lose moneyDon't forget Rule #1

Warren Buffett's methodology for investing:Has the company consistently performed well?Has the company avoided excess debt?Are profit margins high? Are they increasing?How long has the company been public?Do the company's products rely on a commodity?Is the stock selling at a 25% discount to its real value?

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