Value investing

Value investing treats a security as a claim on an underlying business or asset. The investor estimates a conservative value, buys only when the market price offers a meaningful discount, and waits without requiring a precise short-term catalyst. Buy assets below a conservative estimate of intrinsic value and wait for price and value to converge. Key point: Value investing is not a style label to follow mechanically. It is a decision process with explicit assumptions, evidence, review triggers, and exit conditions.

1. 1Separate market price from intrinsic value.
2. 2Demand a margin of safety for analytical error and adverse events.
3. 3Protect against permanent capital loss through balance-sheet analysis and diversification.
4. 4Separate the long-term thesis from short-term price movement in Value investing.
5. 5Write in advance what would make the method unsuitable for the case being analyzed.

1. 1Define an investable universe and minimum financial-strength criteria.
2. 2Normalize earnings, cash flow, assets, debt, and reinvestment needs.
3. 3Estimate a value range rather than one precise number.
4. 4Buy with a sufficient discount and define when the thesis must be reviewed or exited.
5. 5Write the main assumptions, fair value range, and monitoring signals before buying.
6. 6Compare actual evidence with the original thesis instead of judging only by unrealized gain or loss.