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Contents
What is Value Investing? ............................................................................................ 3
The Birth of Value Investing ....................................................................................... 3
The Popularisation of Value Investing ........................................................................ 4
Why You Should Not Be Trying To Invest Like Warren Buffett .................................. 5
Terms That Every Value Investor Must Know ............................................................ 8
8 Financial Ratios That Every Value Investor Absolutely Must Know....................... 11
Characteristics of Value Investing ............................................................................ 16
How Does Value Investing Work In A Nutshell ......................................................... 18
Value Investing Valuation Strategies ........................................................................ 19
Net Net Strategy (Benjamin Grahams Investing Strategy) ................................... 19
Net Asset Value (NAV) Valuation.......................................................................... 21
Discounted Cash Flow (DCF) Valuation................................................................ 21
Price/Earnings to Growth (PEG) Ratio (Peter Lynchs Investing Strategy) ........... 22
Conservative Net Asset Value (CNAV) (Dr Wealths Investing Strategy) .............. 22
How to get started? .................................................................................................. 26
How is Value Investing Like? ................................................................................... 27
Useful Resources for the Value Investor .................................................................. 32

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My cigar-butt strategy worked very well while I was managing small sums.
Indeed, the many dozens of free puffs I obtained in the 1950s made that
decade by far the best of my life for both relative and absolute investment
performance.

Even then, however, I made a few exceptions to cigar butts, the most
important being GEICO. Thanks to a 1951 conversation I had with Lorimer
Davidson, a wonderful man who later became CEO of the company, I learned
that GEICO was a terrific business and promptly put 65% of my $9,800 net
worth into its shares. Most of my gains in those early years, though, came
from investments in mediocre companies that traded at bargain prices. Ben
Graham had taught me that technique, and it worked.

But a major weakness in this approach gradually became apparent: Cigar-butt


investing was scalable only to a point. With large sums, it would never work
well.

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Stock chart from ShareInvestor.com

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Stock chart from ShareInvestor.com

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