Sabtu, 07 November 2009

Value Investing

value investingOne of the most popular method of investing as well as powerful in yield (return) high in the history of world investment is Value Investing. The concept investment was initiated by Prof. Benjamin Graham. One of the world-class value investor is Warren Buffet who is one of the richest people in the world today.

Of course, investors who want to use this strategy to understand the technical evaluation of stock values in accordance with the character of capital markets. Understanding of the fundamental aspects of the key to the success of this value investing. But it's good once we understand the definition of value investing are:

Value investing is finding a stock that is selling at a discount to its intrinsic value or companies that the market has undervalued for some reason unrelated to its economic fundamentals.

From the above definition, the key words are: discount to intrinsic value and undervalued. Then if intrinsic value is meant? How to be undervalued?. Intrinsic value is the fair value and worth of shares traded while the price undervalued the conditions under its intrinsic value.

The difference between intrinsic value and the value of these shares undervalued called discount notes, but with the value of these shares are not undervalued because of fundamental problems. The main problem of this strategy is the ability of our analysis in determining the intrinsic value of a stock that we are undervalued or overvalued know compared to the price.

Margin of Safety

Is the space between the intrinsic value with the value of its undervalued create "safety" equivalent to the discount it. We get benefits obtained when the corrected price back to fair value of margin of safety for her.

This becomes very important because the success of value investing lies in the accuracy of vote shares at the right place also. Certainly the ability of analysis and fundamental research and the discipline becomes important. If you could not buy the stock at that price, you would pass.

Financial Ratios

Some important financial ratios considered in this strategy are:

• price to book ratios
• price to sales ratios
• price to earnings ratios
• price to cash flow ratios

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