Custom Search

The most important thing in value investing is estimating the intrinsic value of the stocks. The evaluation mainly lies in the answer to the questions, what is the company’s actual value, are the shares available at less than the intrinsic value. The point to be noted here is, there can never be an exact intrinsic value. Different investors can judge the intrinsic value differently. For this exact reason comes the concept of ‘margin of safety’, which means you should only buy the stocks at a decent discount price in order to be safe in case of an error in the value estimation.

Value investing is a proven and one of the most successful investment strategies. It was found that thee stocks are very profitable and safe in the long run on an average. There are many ways to calculate the rate of success. One of the significant ways include the buying the low intrinsic value stocks. Many studies and surveys have found out that value stocks out perform the high valued growth stocks. Another considerable way to examine the performance of these types of stocks is to examine the performance of the most successful investors.

The basic fundamentals of value investing roam around choosing the right company. You have to see, from how many years the company is working. This is crucial because it is very hard to correctly evaluate the true value of the company if it is new. A company which is in business over a decade or two is a good select. To be considered for making an investment, the company should have proven itself in running successful business. Survivability is another key factor to be considered, you have to see if the company can survive for another two to three decades. If you feel that the company would not be around in the next ten years then it is worthless to invest in it.
Uniqueness is another criterion one has to consider before value investing. You have to see if the company you want to invest has some uniqueness, if the company has any trademarks, special copyrights or special patents etc, whether it has some competitive advantage, does it have something which makes it better than others, is it the first of its kind in the market.

Stock investment can be very confusing and difficult to master. Learning the basics of value investing can make it very easy. There are a huge number of shares available to make an investment but only a few meet the requirements of the investor. So select the stocks wisely and cultivate the habit of earning good profits.