The process of buying an asset at a price substantially below
its estimated worth, to achieve the highest return on investment,
consistent with preservation of capital.
INVESTING has produced exceptional results in the stock
market since the early 1920s. Value investing is based on
proven principles pioneered by the late Benjamin Graham and
advanced by seasoned investors like Warren Buffett of Berkshire
Hathaway Inc. Buffett, arguably the world's most successful
stock market investor over the past 50 years, was Graham's
most gifted student and a business partner.
investment operation is one which, upon thorough analysis,
promises safety of principal and a satisfactory return. Operations
not meeting these requirements are speculative."
Graham, The Intelligent Investor, 1949, p. 1
You earn high returns on invested capital by buying a small number
of profitable, growing companies, at stock prices considerably
below the value of their underlying businesses. Over time, your
wealth increases as stock prices move up toward their rising business
OF WEALTH. You preserve your invested capital by buying stocks
of a diverse group of financially strong companies at bargain
prices. The favorable difference between a stocks current
price and its estimated business value is called margin of safety.
The safety margin minimizes risk, which is the possibility of
permanent capital losses.