Understanding Value Investing
Value investing is an investment strategy focused on buying securities that appear underpriced compared to their intrinsic value. This approach, pioneered by Benjamin Graham and practiced successfully by Warren Buffett, emphasizes fundamental analysis and maintaining a margin of safety.
"Price is what you pay. Value is what you get." - Warren Buffett
Key Value Metrics
P/E Ratio
Buffett looks for P/E < 15, indicating potential undervaluation
P/B Ratio
P/B < 1.5 is attractive, suggesting possible discount to book value
Return on Equity
Buffett seeks ROE > 15%, showing effective use of capital
Debt to Equity
Buffett prefers D/E < 0.5, indicating financial stability
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