SCREENING : An easy and efficient screening tool to find Value Stocks with Benjamin
Graham's Value Methodology
to access Berkshire Hathaway's holdings ?
GREAT READINGS :
- BERKSHIRE HATHAWAY 2010 LETTER (see page 5-20).
Crisis & What to Do About It By George Soros
- Buy American. I Am. By
WARREN E. BUFFETT
Value investing is :
- buying, with a sufficient margin of safety,
a part of capital of a company whose market price is below the company's "real"
value, or "intrinsic value".
- selling the stock when the
market price reaches the intrinsic value.
theory of ‘value investing’ was invented by Benjamin Graham as early as
1934 and is based on the assumption that two values are attached to all companies.
The first is the market price – the value of the company on the stock exchange.
The second is a company’s business value.
All companies have an intrinsic
value or business value, which is based on its ‘real time’ value in the event
of a merger with a competitor or in a takeover situation. Alternatively the owners
may consider the business value as the amount that could be achieved by breaking
up the company and selling all its assets.
In the long term, stock prices
will reflect this business value, but in the short and medium term, market prices
are often far above or below it. Value investing seeks to make the most out of
Finally, investments should only be
made when the market price is considerably lower than the business value – a minimum
of 40% to 50% below. This difference between the market value and the business
value is called the ‘margin of safety’.
wide margin of safety secures the investments against a permanent loss of capital
– even though short-term adverse market movements may occur.
stocks should be sold when the market price gets close to the business value.
value investors must demonstrate patience when growth stocks are most popular
among investors. History has shown that value stocks and growth stocks alternately
lead the performance statistics.