Training & Lessons

Value Investing – The Powerful Principles

I guess you have heard about Benjamin Graham (1894-1976)? He is considered to be “The Father of Value Investing”. Warren Buffet quotes investing in Graham’s bestselling book “The Intelligent Investor” like this: “By far the best book on investing ever written“. I think Benjamin Graham makes his point verThe Intelligent Investor by Benjamin Grahamy clear when he writes that usually the analysts’ advice is to buy stocks that have gone up a lot (positive momentum), and to sell stocks that have peaked down for quite a while (negative momentum). In just a few words he cuts this off by saying, “this is exactly the opposite of what a true investor should do“. It takes some courage to walk the opposite direction, against the herd and the masses of traders and investors, that all together shout “buy” when you should sell, and “sell” when you should buy. Now we are at the true core and at the inner heart of real value investing: Your decisions are not dependent of the crowds, they depend on your valuation analyzis, and nothing else! Have you noticed the two important principles already mentioned?

  • Enter into the market when the crowds (Mr. Market) shout “sell”, and get out when Mr. Market screams “buy” into your ear = Have the courage to walk the opposite way!
  • The foundation of your investment decisions are based on valuation analyzis, preferrably your own (or someone you trust), and nothing else!

The Stock Bargain Method has a very clear purpose: To pick the best bargain stocks for you! Believe me, this can be done by using the powerful principles of value investing. As a result, the method/model picks the most undervalued stocks available in the markets. And now you probably ask, how exactly is this done? Read more about this here: The Stock Bargain Method

What is an undervalued company really, what qualifies a stock to be regarded as undervalued? Well, it simply means that a company’s shares are for sale at a price (much) lower than its expected market value! And the expected market value is corresponding with the underlying values of a company. The current market value may not at all correspond with the underlying values, at least not all the time, sometimes even quite rare. And it is this difference between the expected market value and the current market value that gives you as an investor great opportunities! Huh, that simple?! Yes, in fact..

I am not getting into the specific mathematical formulas here, that defines if a market price of a share is undervalued or overvalued related to its underlying value and accounting. There are numerous examples of those formulas on other good sites on the Internet, for example here: Magic formula investing performance